Solution Manual For Applied Marketing, 2nd Canadian Edition by Rochelle Grayson, Daniel Padgett, And

Solution Manual For Applied Marketing, 2nd Canadian Edition Rochelle Grayson, Daniel Padgett, Andrew Loos Chapter 1-15 With Appendix Chapter 1 What Is Marketing?

What Marketing Is Not Misconception #1: Marketing Is Common Sense Misconception #2: Marketing Is Equivalent to Sales or Advertising Misconception #3: Marketing Makes People Buy Things They Don‘t Need Misconception: 4: Marketing Is an Art, and You Either Have the Gift of You Don‘t Misconception #5: Marketing Does Not Involve Numbers LO 1.1 Describe some common misconceptions about marketing.

Marketing Defined Marketing Is Managing Exchanges with Customer What Does Managing Exchanges with Customers Include?

LO 1.2 Provide an accurate definition of marketing.

Philosophy of Marketing Perceived Value The Role of Marketing Research LO 1.3 Discuss, with examples, the philosophy of marketing.

How Marketing Has Changed over Time LO 1.4 Outline the evolution of marketing thought and practice.

Chapter Introduction This chapter introduces students to marketing. The chapter first examines some common misconceptions about marketing in LO 1.1 and then presents a proper definition in LO 1.2. The philosophy and thinking that drives marketing and marketers is discussed in LO 1.3. Finally, an examination of the evolution of marketing thought and practice to the present time closes the chapter and completes the preparation of students for further detailed study of marketing topics.

Industry Expert Video Bill Imada, Chairman, IW Group Please note: Video Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-choice Questions

1. Bill Imada defines marketing as: a. selling brands b. people connecting with people, products, and services c. understanding needs d. wanting to improve products and services 2. IW Groups is trying to: a. make the connection between companies and their customers more personal and emotional b. create brand loyalty whenever possible c. better understand people through focus groups and surveys d. increase communications with potential customers.

3. Bill Imada advises marketing students to: a. avoid internships b. focus on getting the highest grades with or without an internship c. exploit the internship environment to the hilt to avoid friendships with coworkers at internship environments.

4. According to Bill Imada, IW Group: a. does better when competitors are weak b. only hires young people who don‘t have preconceived ideas about marketing solutions c. is very secretive about how they do things. d. should help everyone, even competitors.

Discussion Questions 1. How does Bill Imada describe marketing differently than the traditional textbook models?

2. Do you think IW Group‘s multicultural focus influences the way the firm approaches strategic thinking and creative problem-solving?

3. What does Bill Imada mean when he says, ―if someone can invent a better wheel, they should.‖ What Marketing Is Not LO 1.1 Describe some common misconceptions about marketing.

Some students might begin their studies with preconceived bias or incomplete understanding of the nature of marketing and marketers. For example, some might believe that marketing means "sales" or "advertising" and nothing more. It is important to set the stage for how students will approach the study of marketing and provide the proper foundation and background.

Several misconceptions are presented.

Misconception #1: Marketing Is Common Sense Common sense statement #1: A lower price is always better.

Reality: In some cases, a higher price is actually better.

Common sense statement #2: Better service leads to higher profits.

Reality: Better service is only more valuable if customers are willing to pay more for it.

Common sense statement #3: More is better.

Reality: Too many options can lower sales.

What is referred to as "common sense thinking" is really "common beliefs" held by many people about marketing. Review each common sense statement with the class. Ask for a show of hands of how many students believe there is some truth to each statement. Ask why they think this statement is a popular belief.

Misconception #2: Marketing Is Equivalent to Sales or Advertising Ask students to name one function or activity that best describes marketing. Sales and advertising will likely be the most common response. If you then ask students why the results point to sales and advertising more than other functions, their responses will likely centre on familiarity with these function which opens the discussion to the introduction to some of the other functions like distribution and product development.

Misconception #3: Marketing Makes People Buy Things They Don‘t Need Ask students, with a show of hands, if they have ever bought something they didn't need.

Ask some students to explain the circumstances and work to develop the concepts of "needs" and "wants." Ask students why they needed or just wanted specific things that they bought and how they came to the decision to actually make the purchase. Did the salesperson influence their thinking? Was the item on sale? Then, ask students if they ever wanted something, but didn‘t have the ability to purchase it. While marketers influence desires, customers have control to buy products that they have demand for.

Discuss with the students the ―Ethical Dilemma‖ in the chapter: Business managers have to make tough decisions that impact others. In fact, marketing managers have the specific job to influence customers so they are willing to exchange with the firm. Making these decisions requires a consideration of both morals and ethics. Morals refer to the personal beliefs the manager might have, while ethics refers to the social expectations others might have. In other words, morals refer to what a person thinks is right or wrong. Ethics is what the culture/society thinks is appropriate or not. Consider a manager for a furniture company. A chair costs $100 to manufacture. However, from research, the manager knows some customers are willing to pay $400 for the chair, while other customers are willing to pay $700 for the same chair. Ask: What price do you think the marketing manager will suggest? What does this suggest about the morals of the manager? What price is ethical? What does this tell you about perceptions of marketers in general?

Misconception #4: Marketing Is an Art, and You Either Have the Gift or You Don‘t

Ask students where creative skills are most useful in marketing? Advertising? Product conceptualization and design? Discuss whether idea generation is a gift or can be learned—especially in an environment where creative thinking is the norm in a marketing department or firm.

Misconception #5: Marketing Does Not Involve Numbers This misconception provides an opportunity to discuss the mathematics that students are likely to deal with in the course and in their marketing career. Sales reports and the various ratios marketers are likely to deal with can be introduced. Ask students why reports of profit margins and sales per square foot would be useful to marketers.

Review the Applied Metrics scenario in chapter 1: ―Measuring performance: Sales vs Profit:‖ Marketing managers often measure performance in terms of sales and profits.

Though the two are related, they are not equal and provide different information about success. Consider the case where a marketing manager has two products in the division.

One assistant manager is in charge of each product. The marketing manager is reviewing their performance for the previous month and has the following information: Product A vs Product B -Sales and Profits

In the above scenario, we have two different products (Product A and Product B) with different unit prices, units sold, and costs of goods sold.  Total Sales: This is the total revenue generated from sales of each product. It is calculated by multiplying the unit price by the number of units sold.  Cost of Goods Sold: This is the cost incurred to produce or purchase the goods sold. It includes the cost of raw materials, labor, and other expenses associated with producing or purchasing the product.  Gross Profit: This is the difference between total sales and the cost of goods sold.

It represents the amount of money earned from sales before deducting operating expenses.  Operating Expenses: These are expenses incurred in running the business, such as salaries, rent, utilities, and marketing expenses.  Net Profit: This is the amount of money earned after deducting both the cost of goods sold and operating expenses from total sales.

As we can see from the table, Product A has a lower unit price and a higher number of units sold than Product B, but with a lower Cost of Goods Sold, it results in a higher total gross profit. And even though they have the same operating expenses, Product A has a higher net profit overall.

This example illustrates the difference between sales and profit - while high sales can lead to higher gross profits, it's important to also consider the cost of goods sold and operating expenses to accurately determine the net profit of a business.

Author Podcast 1.1 Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Dan Padgett opens by discussing misconceptions about marketing. Which of the following is one of the misconceptions he mentions? a. Marketing is mathematical. b. Marketing is a process. c. Marketing requires a large staff. d. Marketing is about getting sales.

2. Jasmine Bina feels that marketing: a. is an art that you can develop over time. b. is something you either have or don‘t have the instinct for. c. is a process of finding value by measuring and evaluating. d. has been greatly expanded by the many ways of disseminating information about one‘s product.

3. Dan Padgett says that marketing majors often have the misconception that: a. marketing is about identifying unique features and benefits of one‘s product. b. marketing is non-mathematical. c. marketing is one of the easier business disciplines. d. marketing positions offer more job opportunities.

4. The value of using metrics, according to Jasmine Bina, is that: a. a marketer can learn a great deal by measuring and testing. b. it can replace brainstorming. c. using metrics saves time. d. using metrics allows one to have a smaller marketing staff.

Discussion Questions 1. What are two or three of the perceptions of marketing that you currently have?

2. Realizing that you are just starting the course, what are some of the things you might measure in order to learn more about launching a new product (for example, the size of the market for your product)?

3. What do the authors mean when they say that marketing is perceived to be an art?

1.1 Concept Check Question 1: What are some key arguments that marketing is more than just common sense?

Answer 1: Each of the examples in the text shows that common sense thinking is not

always correct. In each case common sense thinking led to improper marketing decisions.

For example, "lower price is always better" proved to be wrong. In some cases, sales increased when the selling price was raised. Ask students for another example of "common sense " thinking that is not always correct. This discussion presents the opportunity to discuss the need for marketing research to guide decisions.

Question 2: How would you respond to someone who said that marketing is really just sales?

Answer 2: The textbook uses this idea to introduce the four pillars of marketing - product, price, place, and promotion. Use this opportunity to develop a broader appreciation of what marketers' work entails - beyond simple selling a product or service. Ask students to describe the 4Ps for Apple's iPhone. Discuss how other marketing activities make the "selling" easier. Ask students if they think consumers buy just one main feature provided by the iPhone, like the video camera?

Question 3: Can marketing make people buy something they don't need? Use the distinction between needs and wants to support your answer.

Answer 3: Consumer decision making is complex. Wants and needs need to be explained.

Generally speaking, consumers do not buy products and services they do not need or want. Marketing can influence a consumer's choice of car if the consumer has made the decision to buy a car. Ask students to explain how car companies influence car buyers?

Ask students which factors - price, style, brand etc. - they think would most likely influence a buyer shopping around for a new car?

Question 4: A friend tells you that he intends to major in marketing because unlike other business majors like finance or accounting, marketing doesn‘t require any math. How do you respond?

Answer 4: Although most common marketing math involves only addition, subtraction, multiplication, and division, marketers need to feel comfortable dealing with numbers.

Ask students where math is likely to come up in marketing work - spreadsheet sales reports and analysis, for example. Discuss the need to be familiar with ratios such as sales per square foot, as a metric for comparing efficiency of managers of two similar retail locations. Statistics is another area to raise, especially as it relates to marketing research.

For example, illustrate statistics used to help marketers evaluate the impact on sales or consumer attitudes before and after a marketing intervention, like advertising on social media.

Marketing Defined LO 1.2 Provide an accurate definition of marketing.

After discussing some popular misconceptions about marketing in LO 1, students are presented with the proper definition of marketing and some key concepts including - the exchange process with customers, markets, marketing plan, and the target market.

Marketing Is Managing Exchanges with Customers The textbook defines marketing as "managing exchanges with customers". Ask students to list some of the specific exchanges that take place between marketers and customers.

Begin with the exchange of money for the product or service sold. Then develop the discussion about other exchanges - for example when an advertisement provides product information that might help the customer make a more informed purchase decision in exchange for a positive customer attitude toward the brand or company as a whole.

Discuss the importance of the marketing plan which includes goals, activities needed to achieve goals, a timeline and budget for included activities, and measures to evaluate the activities. Discuss how the marketing plan can act as a control document for managing the exchange process with customers.

What Does Managing Exchanges with Customers Include?

This section takes students through an example of what a marketing manager would typically be expected to deal with. In this case, a meeting is to take place where marketers will discuss a variety of questions related to the sale of gelato. The textbook begins with the important definition of the target market. Discuss each item and ask students what their suggestions would be if they were the marketer at that meeting.

1. You will need to decide with whom you try to exchange.

2. You will need to decide what you will offer to exchange.

3. You will need to determine what you want in return from your customers for the gelato.

4. You will need to decide how customers will buy from you, including where, when, and how customers will exchange with you.

5. You will need to decide how to influence the customers to exchange with you.

Author Podcast 1.2 Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple-Choice Questions 1. Marketing is: a. an important activity that is carried out after a product is launched. b. a set of activities designed to increase the probability of an exchange between a customer and a business. c. a set of skills that a person possesses with or without training. d. a subset of product development.

2. The exchange is: a. both sides getting something they value. b. returning a product in order to get a different product. c. a unique kind of market. d. a brainstorming session in which everyone involved shares their ideas.

3. The role of marketing is to: a. produce advertising that is better than the competitors‘ b. direct the development of new products. c. maximize the perceived value of a product or service to the customer. d. look at what has been done in the past and try to update it.

4. Marketers today: a. are younger than ever before b. work harder than ever c. have difficulty finding jobs. d. do much more research than they did in the past.

Discussion Questions 1. How would you define marketing?

2. Explain in your own words what is meant by ―exchange‖ when it refers to the relationship between a producer and the customer.

3. What kind of research might a marketer do to learn more about a given market?

1.2 Concept Check Question 1: Define marketing in a single sentence.

Answer 1: The text provides a simple working definition of marketing to be the management of exchanges with customers. This question provides the opportunity for discussion of the complexity of marketing—the definition that the American Marketing Association provides is ―…the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large‖—and what marketing DOES involve: multiple parties; an exchange of some sort (goods, services); and offerings, communication, and lastly, delivery.

Question 2: What are the basic requirements for an exchange to take place?

Answer 2: For an exchange to take place, multiple parties must come together in some way, and must both have something of value to the other. Typically, this is money (customer has, profit-oriented company wants) and a service or product (profit-oriented

company has, customer wants). Discussion can also take place around exchanges that do not include money and goods/services: a volunteer donating time or labour to a non-profit group, often in exchange for a feeling of good will or philanthropy.

Question 3: What is a target market and why is this concept important to marketers?

Answer 3: A target market is the primary group of customers that a company/producer wishes to exchange with. By accurately identifying the target market for a product, marketers can then tailor communications with the market, thus increasing the chance for a valuable exchange for both parties. Discussion can include asking students to identify companies or products that have successfully identified and market to their target market, as well as an example of a company that perhaps missed the mark in some way.

Philosophy of Marketing LO 1.3 Discuss, with examples, the philosophy of marketing.

Perceived Value At the heart of marketing philosophy is an understanding that marketers must manage perceived value—different customers have different perceptions of value. Ask the class if they would be willing to pay more for gelato than the equivalent amount of ice cream?

Does the word "gelato" mean something special to them when compared to "ice cream"?

Use other examples where perceptions of value may be different—a coffee from Dunkin Donuts and one from Starbucks.

This leads to the important marketing concept of the "value proposition"—the combination of benefits specific to a product. What is the value proposition being offered to a target market at Starbucks? Answer: premium quality coffee, service, atmosphere, status, Wi-Fi, etc. Ask the class what they consider the value proposition is for some product they bought recently.

The Role of Marketing Research In this segment, students are introduced to the importance and value of marketing research—measuring the outcomes of specific marketing activities against goals. By testing ideas, marketers learn how well their approach is working and thereby mitigating risk of failures in the future. Ask the class how they would test for the same marketing decisions taken for the gelato case. For example, suppose the marketers believed that their gelato would be perceived by customers at twice the price of equivalent servings of ice cream. How would they test this theory? Some might suggest a survey or a trial run in some retailer to empirically learn the customers' perceived value.

Author Podcast 1.3

Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple-Choice Questions 1. Which classic example of a product failure does Dan Padgett use? a. Ford Edsel b. Apple Lisa. c. New Coke. d. Rolex watches.

2. In Dublin, Ireland, Uber is: a. outlawed because it is too successful. b. competing with a consortium of other taxi companies. c. much less successful than it is here in Canada. d. much more expensive to use than traditional taxis.

3. Dollar Shave Club is successful mainly because: a. the products are so much better than those you can find in a traditional store. b. the products are much less expensive than those you can find in a traditional store. c. the advertising is more effective than that of competing companies. d. they offer regular sales.

4. Uber‘s success can be attributed to their: a. use of highly qualified drivers. b. having a fleet of luxury cars. c. identifying and addressing pain points of traditional taxi services. d. offers of amenities like cold drinks, healthy snacks, and in-car entertainment.

Discussion Questions 1. What are some of the ways mentioned by the authors that Uber or Dollar Shave Club used market research to drive their successful marketing plan?

2. What are the pain points of traditional taxi services that Uber addresses?

3. Briefly describe the method used by Dollar Shave Club to gain information about their target market.

1.3 Concept Check Question 1: What is perceived value and how is it important to marketers?

Answer 1: Perceived value is perceived benefits in relation to perceived costs associated with an exchange (goods, services, etc.). Perceived value is important to marketers because they are responsible for affecting the perceived benefits of an exchange and making sure that customers believe that they are getting more benefit than they are paying. Marketers manage this by finding the right group of customers (the target market) and maximizing the perceived value relative to that group.

Question 2: What does it mean to suggest that good marketers are like ―naïve scientists‖?

Answer 2: A naïve scientist has a general idea of what might work, based on experience or theory, and is able to test out that idea and determine if the outcome is desirable. Based on this, the idea can be altered or improved upon. Ask students for examples of this concept in real life.

Question 3: Is marketing more art or science? Explain.

Answer 3: Student responses can vary based on point of view. For responses indicating that marketing is more art than science, references to creativity, perception, communication, etc. may be applicable. In terms of marketing being more science than art, references to methodology, theory, and ways to measure outcome, value, etc., can be made. Ask students to debate their point of view.

How Marketing Has Changed over Time LO 1.4 Outline the evolution of marketing thought and practice.

This segment looks at the evolution of business and the emergence of marketing as an important tool. The stages of evolution are referred to as "marketing orientations" and are presented in Table 1.1.

Ask students how these "marketing orientations" reflected the types of businesses and economic conditions of the times. How were customers different during those time periods? Focus discussions on the "social orientation" of today and the buzzwords of

social networks, social responsibility, and sustainability. As students which companies and products reflect the "social" marketing orientation and which they think do so poorly.

For example, students might select Tesla as a good example and Dunkin as a poor one.

Mini Case 1A Case Questions and Review Question 1. Please describe a subsistence economy.

Answer 1. Subsistence economies focus on providing and provisioning for the basic needs of the individual and the community. These economies rely on natural resources, and economic activity does not have monetary value. These economies are focused on needs and not wants.

Question 2. What is the gift economy? When and why do you gift things?

Answer 2. The gift economy is an exchange based on giving in the context of a relationship without any expectation of profit or personal material gain. Student examples may vary but can include buying a co-worker a coffee on the way to office.

Question 3. Beyond gifting, can you provide examples of other practices from a subsistence-based economy that exist today?

Answer 3. In developing regions of the world, there is still a reliance on subsistence economies. Some families grow their own vegetables and herbs.

Question 4. Have you ever participated in a trade or barter exchange? Why did you choose this option? How was it different from a monetary exchange?

Answer 4. Students‘ examples will differ. In trade or barter, items of equal value are exchanged, but money does not change hands.

Question 5. As stated, all human beings are adaptable. Can you think of other adaptations in how we conduct business that have occurred over time?

Answer 5. Examples will vary. Online meetings are a frequent occurrence due to changing technology.

Question 6. Have you ever visited an HBC store? Did you see the ―point blanket‖ design?

What do you remember about your experience?

Answer 6. Students‘ answers will vary.

Mini Case 1B

Case Questions and Review Question 1.Can you think of any other Canadian companies that are leading the way in ESG? Answer 1. Student answers will vary. Some of the top ESG stocks in Canada currently include Royal Bank of Canada, Enbridge, Canadian National Railway, and Dream Impact Trust. .

Question 2. How can Canadian companies use ESG marketing to communicate their commitment to sustainability and social responsibility to customers and other stakeholders?

Answer 2.Companies communicate their commitment to reducing their environmental impact, improving social welfare, and strengthening their governance practices by showcasing special initiatives. This may include how the company is increasing the use of renewable energy sources or how they are investing in their employees‘ well-being.

Volunteering within their local communities or donating to local charities also communicates their commitment. Companies can also promote transparency and accountability in their decision-making processes.

3. What are the key challenges and opportunities for Canadian companies in effectively integrating ESG considerations into their marketing strategies and activities?

Answer 3. Challenges faced by Canadian companies include a limited awareness and demand for ESG by stakeholders (stakeholders are still learning the importance of ESG), a balancing of short-term and long-term goals (ESG initiatives can require a larger upfront investment), and a lack of consistent reporting standards (which makes comparisons between companies difficult). However, ESG is increasingly being used to assess the sustainability and social responsibility of a company and is often being used by investors to assess the long-term performance and potential of a company. Canadian companies that effectively integrate ESG considerations will improve their relationships with all stakeholders (including employees, customers, suppliers, and communities) and they will enhance their brand reputation and loyalty, both of which will result in a competitive advantage. .

4. How are Canadian companies using ESG marketing to differentiate themselves from their competitors and appeal to consumers who prioritize sustainability and social responsibility?

Answer 4. Canadian companies are differentiating themselves in many different ways, including: investing in renewable energy, investing in sustainable supply chain management practices, promoting ethical practices, investing in sustainable philanthropy practices, supporting economic development in communities, partnering with local organization to support economic growth, and supporting community initiatives.

5. How can Canadian companies use ESG marketing to build trust and credibility with consumers and other stakeholders?

Answer 5.To build trust and credibility, companies should be transparent about their ESG efforts, they should engage stakeholders to provide feedback or collaborate on sustainability initiatives, they should demonstrate ESG progress or results, and they should partner with reputable organization to increase their ESG efforts.

Author Podcast 1.4 Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple-Choice Questions 1. A major game changer in modern marketing, according to the authors, is: a. highly publicized product failures like New Coke. b. impact of social media c. the growth of small businesses d. growth of television advertising.

2. One of the ways social media platforms like Facebook has changed the way marketing is done is: a. marketers are able to gather much more information about individuals. b. users enjoy clicking on ads, which are cheaper to produce on these platforms. c. new information is available every day. d. users enjoy communicating with their friends.

3. Consumers are more willing to share personal information if, in return, they can get: a. discounts. b. more information about companies. c. access to more contacts. d. customized information about products.

4. One of the biggest changes in marketing with the advent of social media platforms is: a. greater use of these platforms in marketing. b. the ability to do micro-targeting. c. more new products are available. d. less market research is needed.

Discussion Questions 1. Name three of the game-changing events that Dan Padgett mentions at the beginning of the video. Can you think of others?

2. Do you agree that consumers are more willing to share personal information if they get customized ads, products, and news about products in which they are interested? Why or why not?

3. What is meant by the term ―micro-targeting‖?

1.4 Concept Check Question 1: How might an economy shift over time? What are some of the different

categories?

Answer 1: In terms of the economy of Canada, its evolution is largely centred on the particular emphasis of the times: communal, agricultural, industry, service. Pre-1600, the focus was on meeting the basic needs of the individual and the community. From 1600 to 1850, the economy was mostly rooted in agriculture; however, between 1850 and the 1970s, a focus on industry developed. After WWII, the service industry developed, and through present day, the service economy remains a mainstay. Today, social responsibility is also impacting companies since consumers demand companies act in the best interests of society.

Question 2: What are the different marketing orientations?

Answer 2: The different marketing orientations are: subsistence/gift economies, trade/bartering, production, sales, market, and social. Refer to Table 1.1 for further discussion and examples of the dominant economic sector that corresponds with these orientations.

Question 3: Are the different marketing orientations unique to the Canadian economy or can they be applied to global business markets? Explain.

Answer 3: While a case can be made that the different marketing orientations are specific to the economy of Canada, it‘s more likely that these general orientations can be loosely applied to the global market, especially within First World countries with capitalist economies. Discussion around this topic can be engaging for students depending on their experience and world view.

Application Questions 1. What is the purpose of a marketing plan and what should be included for a plan to be effective?

Answer: A marketing plan identifies marketing goals, activities and dependencies needed to achieve those goals, timelines, and budgets for included activities, and defines metrics that will be used to evaluate the activities.

2. Think of product you are familiar with and imagine you have an idea for a better version of the product. How would you go about testing whether your product might be successful or not?

Answer: Student answers will vary but should include defining the target market, researching demand, researching the wants and needs of potential customers and compiling feedback from prior customers/users.

3. Think of a product you know about that failed. Provide a marketing explanation for

why the product failed.

Answer: Student answers will vary but should answer why the product failed to meet customer needs and should focus on how demand shifted from said product.

4. Choose a product or service that you believe has a strong value proposition. Analyze its value proposition in terms of the benefits and advantages it offers to customers and how it differentiates itself from competitors.

Answer: Student answers will vary.

5. Describe how the Canadian economy has changed over time in regard to different sectors of the economy. How did the shift in importance of different sectors affect marketing practice?

Answer: Canada moved from an emphasis on agriculture to industrialization to services.

Marketing orientations shifted from subsistence and gift economies to trade and bartering to a product orientation to a sales orientation to a market orientation to a social orientation.

6. Companies can have different marketing orientations, as described in the chapter.

Provide an example of a company applying each marketing orientation.

Answer: Student answers will vary but should include the following marketing orientations:      

Subsistence/Gift Economies Trade/Bartering Product Orientation Sales Orientation Market Orientation Social Orientation

Discussion Questions 1. Many people criticize marketing, arguing that marketing influences customers to buy things they really don‘t need. Marketers argue customers have choices and choose what they want that provides them the most perceived value. Choose a side to this debate and defend your position based on how you think marketing impacts society. Is marketing good or bad for society as a whole?

Answer: Student answers will vary.

An argument that marketing is good for society is as follows: Marketing cannot make people buy something against their will. Marketers try to influence wants, but customers

ultimately decide if something is worth buying or not. Marketing informs customers of their options and helps manage customer expectations. Informed customers make better decisions. Business benefit from marketing and that financial gain affects society in positive ways.

An argument that marketing is bad for society is as follows: Marketing influences customers to buy things they really don‘t need. Too many resources are spent trying to influence human behaviour and marketers can brainwash or dupe consumers limiting their autonomy.

2. How does the marketing philosophy differ from other academic areas you have studied? Can you explain the likely reason for the differences in how the different areas see the world?

Answer: Student answers will vary. Here are a couple of sample answers 

 

Marketing differs from chemistry in that chemistry is a science with one objective correct answer. Marketing is equal parts art and science and there can be many correct choices in marketing.

Marketing differs from history in that marketing is forward facing while history looks to the past.

Marketing differs from accounting in that marketing focuses on consumer behaviours and how to influence those behaviours while accounting focuses on business outcomes and how to report these findings.

3. Do products have intrinsic value or is value created? For example, consider this question, ―Is a diamond or a bottle of water more valuable?‖ Answer: Student answers will vary.

4. Do you think that all companies should be socially responsible? Why or why not?

Answer: Student answers will vary. Arguments in favour of social responsibility include the benefits to society and can lead to increased sales and profits as well as attracting better employees who care about social issues. Arguments against social responsibility include that people need to provide for themselves and not expect corporations to and that social responsibility can put a strain on a company‘s resources and earnings.

5. Should companies, government, or nobody be responsible for determining what will be sold to customers?

Answer: Student answers will vary.

Running Case This Saves Lives (TSL) Video Please note: Video Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-Choice Questions 1. The motivator for the start-up of This Saves Lives was: a. a new energy bar company CEO wanted to address a social need. b. the CEO saw a television ad about hungry children and wanted to do something to help. c. the CEOs trip to Africa. d. a college friend suggested that the CEO adopt a social issue as part of the marketing campaign for the new company.

2. When the company founders started developing their product, which company did they look at for ideas of how to be successful? a. Ben & Jerry‘s b. Newman’s Own c. Tom‘s Shoes d. Warby Parker glasses 3. Who came up with the idea of naming the snack bar This Saves Lives? a. Ryan b. the Director of Marketing c. Ryan‘s oldest child d. Ryan’s wife 4. The idea of creating a new line of food bars came about because: a. it is a low-cost type of product to produce. b. it matched the food aid objective—to provide a nutritional food packet for each item sold. c. the founders were working for a competitor and wanted to develop their own product d. one of the co-founders is a chef.

Discussion Questions 1. What is your reaction the name of the company and product: This Saves Lives?

2. How did the company founders decide on developing a food bar?

3. What kind of research did the founders do as they were developing their food bars?

Running Case This Saves Lives (TSL) Questions Answers might include the following: 1. What other brands (in any category) can you name that have a social orientation/goal?

There are many brands that students might name: Tom & Jerry‘s Ice Cream, Tom‘s Shoes, Newman‘s Own products, etc. There are three important points for this discussion.

1) Have them be specific about the details of the social mission. You can even have them look this up if you have a live class and allow/prefer they use technology in class, or you can do it for them and show the class. 2) Differentiate those companies that have a social mission tied specific to their product/service category (e.g., TOMS, Warby Parker, TSL) vs those that have adopted a specific charity or carry out social cause activities unrelated to their category. This prompts a discussion of whether it is important (or more effective) to have a specific marketing goal in mind for corporate philanthropy. 3) Ask them if it is necessary for companies to have a social mission. This is a great opportunity to play Devil‘s Advocate by pushing them to name the specific social missions for the brands they buy and then the products/services they use most. Most students can‘t name more than 3 or 4 social missions for the brands they buy most. A simple example is to ask them what social missions their school supports and see if they know. If you want to add further discussion, you can ask them how much more they would be willing to pay for the products they buy regularly to support the social mission for the company.

2. Who do you think might buy TSL bars, and why would they buy them?

Likely buyers look for premium ingredients, are less price sensitive, and are interested in the philanthropic aspect of the purchase. The opposite is also true…unlikely that price sensitive customers who don‘t pay much attention to the social mission of companies will see much value in TSL bars.

3. Do you think the humanitarian, philanthropic aspect of the purchase is more or less important than the taste of the bars for TSL’s success?

The humanitarian aspect of the purchase of TSL bars is important, but if the bars don‘t taste good, buyers won‘t become repeat customers. It can be interesting to include a discussion about the ―standard‖ for taste in this category. Do most customers think bars should taste good or is this a category for which customers have a lower threshold for taste? Discussion will likely reveal differences in expectations for bar categories. For example, ―power bars‖ generally don‘t taste as good as ―snack bars.‖ Which type of bar is TSL really? Also, it is helpful to point out that the social mission in this case is in the name of the brand, which indicates TSL intends to make the social mission a key consideration for their target customers.

4. Do you think the TSL approach can or will be copied by competitors such as Kind bars? Why or why not?

Kind already has a humanitarian mission, although it is different from that of TSL bars. If the buy one/give one program becomes a reason buyers choose TSL, other competitors are likely to adopt the approach, and newcomers to the snack bar market almost certainly will feel it is a necessary component of entry into the market if they want to target the same customers.

5. Do you think the bar is the best option for TSL? What other product options do you think might work to accomplish its goals?

This is a good discussion question, as opinions may vary widely about what other product might be equally or more successful than snack bars. Things to consider include difficulty of entering the market, price point as it affects profit, especially when a percentage of revenue will be committed to fulfilling the philanthropic mission, etc.

Some suggestions to start a discussion if students don‘t readily have ideas would include water, cereal, protein shakes, juices, even fruit. A good follow up question is to ask if TSL should consider non-food items. Can they attach their BOGO model to just about anything and still donate Plumpy Nut packets no matter the product purchased? Note this prompts a consideration of TSL expanding by becoming a more general brand T_SL to accommodate other products--TWSL (This Water Saves Lives), TCSL (This Cereal Saves Lives), etc. This is actually under consideration by the company to family brand under the general umbrella TSL (This Saves Lives).

Running Case This Saves Lives (TSL) Application Exercise Teaching Note: If you decide to assign this exercise, you might want to treat it as a small group activity, allowing students to divide up the activities. You might ask the groups to prepare a report of their findings for discussion in a later class. It is a good idea to require them to use visuals by taking photos of the bar aisle and packaging close-ups etc. to present to others for discussion. This engages them more and provides a check that they completed the exercise at a reasonable level.

Chapter 2 Organizing and Planning for Marketing Strategy Marketing Strategy and Differentiation Marketing Strategy of Marketing in an Organization Establishing a Competitive Advantage LO 2.1 Describe marketing strategy and marketing‘s role in creating a competitive advantage.

Marketing Planning Situation Analysis The Marketing Plan The Marketing Mix LO 2.2 Define the elements of marketing planning.

Marketing Implementation and Control Implementation Plan Evaluation and Control LO 2.3 Outline the key issues for implementing and controlling the marketing process.

Chapter Introduction This chapter introduces students to strategic planning. To be successful, marketing requires the establishment of goals and a plan to achieve those goals. The chapter first examines strategic marketing and the primary goal of creating competitive advantage in LO 1 and then presents the structural elements that make up a marketing plan in LO 2.

Finally, details that describe implementing and controlling the marketing process is discussed in LO 3.

Industry Expert Video Leanne Nicolle, President and CEO, Big Brothers Big Sisters of Toronto Please note: Video Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-choice Questions 1. What is marketing strategy according to Nicolle? a. expression of the strategy of the organization b. overall organizational strategy c. marketing mix d. product offering 2. How does marketing strategy impact the marketing mix?

a. directs the implementation of the marketing mix b. drives outcomes from the marketing mix c. the marketing mix drives marketing strategy d. sets the position for the product offering 3. What are the key issues with the implementation and evaluation of the strategy? a. determining the key performance indicators b. timing of marketing activities c. control of the environment d. external and internal implications 4. What major marketing activity has Big Brothers Big Sisters undertaken?a. expansion b. repositioning c. new product launches d. logo update Discussion Questions 1. How does Leanne Nicolle define marketing strategy?

2. In what ways does marketing strategy impact the marketing mix for Big Brothers Big Sisters?

3. How can you prepare yourself for a career in marketing?

Marketing Strategy and Differentiation LO 2.1 Describe marketing strategy and marketing’s role in creating a competitive advantage.

Marketing Strategy and the Role of Marketing in an Organization The textbook defines strategy as a plan of action used to achieve a goal. Ask the class to relate this definition to some illustrative examples - such as, a firm wants to increase sales by 10% over and above the same period last year. The plan is to increase advertising and discounting to achieve the desired goal.

Executing a successful marketing strategy involves three major steps (display Figure 2.1 for the class to see). First, the manager sets specific marketing goals and determines a plan of action to achieve the goals. Second, the plan is implemented using specific marketing tools and tactics. Finally, the third step is to evaluate the plan activities to see what works, what doesn‘t, and what needs to be adjusted to improve the likelihood of success.

Display the typical organization structure in Figure 2.2 for the class to see and compare the differences between large and smaller companies. Ask the class if they think there are advantages to working in a larger or smaller organization. They might mention the bureaucracy of large organizations versus the intimate connections within smaller ones.

Discuss the concept of a strategic business unit (SBU)—a subgroup within an organization that decides its own strategy and has its own customers. What are the advantages and disadvantages of this sort of structure?

Discuss the idea of an organization's mission statement defined as the firm‘s business focus that provides direction for the company (display Table 2.1 for the mission and vision statements at Big Brothers Big Sisters Toronto, Hootsuite, and MSLE Foundation).

Ask the class why mission statements are so important to the management of an organization and how it sets the stage for establishing goals and objectives in the plan.

The mission statement sets the limits and direction for the organization. Ask the class what they think the mission statement is for Amazon or Netflix.

Discuss marketing myopia—defining your mission too narrowly and focusing on the company instead of the customer and potential future environmental trends. Ask the class of an example they might think illustrates marketing myopia and why they think this is so.

Display the box below and ask students for their answers to the questions.

Evaluating Mission Statements

Establishing a Competitive Advantage The most successful companies offer something others don‘t, which suggests that a key goal of marketing strategy is to differentiate the company from its competitors (product differentiation). Specifically, marketing strategy at this level involves two related questions: 1. How will we be different from our competitors?

2. How will the difference help us offer more value to the customers we target?

Ask the class to identify the differences between some competing products such as Coke and Pepsi, Rav4 and Rogue, etc.

Companies differentiate by focusing on a unique selling proposition—the single most important point of differentiation from competitors. Ask the class to identify the most important point of differentiation between the products they mentioned earlier. Is it price? style? user image? sweetness?

Mini Case A Question 1. How can organizations ensure that their Reconciliation Action Plan (RAP) is meaningful and effective, rather than just a symbolic gesture?

Answer 1. To be meaningful and effective, organizations need to identify the root cause of reconciliation issues, engage all stakeholders, identify, and prioritize action by setting goals, implement and measure progress against these goals, properly allocate resources, ensure accountability, and maintain momentum and commitment.

Question 2. How can organizations ensure that their marketing efforts align with their RAP and support reconciliation efforts?

Answer 2. Organizations can engage stakeholders in the marketing process to ensure their perspectives are included in the marketing materials. Effort should be taken to ensure communication with marketing materials aligns with the goals of the RAP. Question 3. How can organizations use their marketing efforts to raise awareness about reconciliation and the work begin done through their RAP? Answer 3. Marketing materials should educate and raise awareness as to the challenges, issues, progress made, and future plans. Marketing materials should also communicate the commitment of the organization to reconciliation and the specific actions being taken through the RAP. Question 4. What are some potential challenges that organizations may face when trying to integrate reconciliation into their marketing efforts?

Answer 4. Potential challenges could include marketing materials that are cultural insensitive, unable to build trust, show a lack of understanding of the culture, history, or issues, and balancing organization goals with reconciliation. Measuring and evaluating the marketing efforts is also difficult.

Question 5. How can organizations handle potential backlash or criticism when incorporating reconciliation into their marketing?

Answer 5. When backlash or criticism is faced, organizations should approach this with a commitment to learning and improvement. It is important for organizations to empathetically address concerns, be willing to make changes if required, and to foster an inclusive effective marketing strategy that aligns with their RAP. Question 6. How can organizations ensure that their marketing efforts are respectful and culturally appropriate when targeting or partnering with Indigenous communities?

Answer 6. The best way to ensure marketing efforts are respectful and culturally appropriate is to involve the Indigenous communities in the marketing plan. This ensures the perspective of the community is included and will reduce the possibility of a lack of understanding of the culture, history, issues, or actions planned.

An advantage over competitors gained by offering greater customer value is referred to as a competitive advantage. Ask the class to identify the competitive advantage of some

product - such as iPhone - and how this competitive advantage developed.

Marketers create a brand name to identify their product from others. Ask the class to describe the associations they have when they hear a brand name like Coca Cola or iPhone.

Author Podcast 2.1 Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Having a mission statement is: a. critical for a company’s success b. good to develop once a product is launched c. not a key element of success d. an outdated idea 2. A mission statement: a. describes the management structure of the company b. tells customers who and what a company is c. outlines career paths available to employees d. describes the history of the company and provides background on the managers 3. When a company‘s mission statement changes: a. it‘s because a new product line has been introduced. b. it‘s a sign that the company has experienced rapid growth. c. employees can be confused about the company’s goals and direction. d. it‘s because the company has gone from privately held to public.

4. When a company doesn‘t have a mission statement: a. a strong marketing plan can fill the gap. b. it is more difficult for the company to scale up. c. it is often because the company is large and diversified. d. it usually means a new CEO has come on board.

Discussion Questions 1. How important is it for a company to have a strong mission statement?

2. What is the role of the mission statement in creating a marketing strategy for a product or product line?

3. How might a company communicate its mission statement to its customers?

Mini Case B Question 1. Have you heard of similar drone delivery companies? Do you see value in the emerging drone delivery ecosystem?

Answer 1. Student answers may vary but should include various examples. Drones can be

used to delivery many different items. Drones are increasingly being used to not only deliver medical supplies, but also small packages directly to customer‘s houses. These packages can include delivery of food or beverages, letters or parcels, small household articles, books, and small hand-held electronics. Value should be seen in the emerging drone delivery ecosystem as drones reduce the environmental footprint when compared to the vehicle delivery system. They use electric power, reducing carbon emissions and also help alleviate traffic congestion. Other advantages of drones include: increased speed and efficiency of delivery, access to remote or hazardous areas, mitigating safety and risk in hazardous deliveries, and increased cost savings.

Question 2.How can these companies stand out from each other and other drone delivery companies?

Answer 2. To stand out from competitors, these companies can develop and utilize advanced drone technology (invest in research and development), prioritize safety measures and customized solutions, provide exceptional customer service, and continue to adapt to the changing environment.

Question 3.Do you think it is smart to try to expand into other markets beyond just healthcare? Would it be more profitable if they focused on services other than healthcare?

Why or why not?

Answer 3. Yes, it is smart to diversify into other markets which would reduce risk and increase the potential for higher returns. These companies should ensure that any diversification aligns with the financial goals and mission of the company.

Question 4. What are the key factors that influence the adoption of drone-based delivery solutions in Canada, and how can the above companies use this information to tailor their marketing efforts?

Answer 4. Some of the key factors that would influence the adoption of drone-based delivery solutions would include the regulatory environment, the infrastructure and airspace management, the remoteness of some areas of Canada, operational efficiency, and public perception. Marketing of the advantages of drone delivery will help companies increase public awareness and acceptance of drone deliveries.

Question 5. What are the key competitive advantages of drone delivery services compared to other delivery methods (e.g., ground transportation, traditional air transportation), and how can these companies effectively communicate these advantages to potential customers?

Answer 5. The key competitive advantages are similar to the value seen in the emerging drone delivery ecosystem (as asked in question 1). Advantages include: increased speed and efficiency of delivery, access to remote or hazardous areas, mitigating safety and risk

in hazardous deliveries, environmental sustainability, and increased cost savings. Drones reduce the environmental footprint when compared to traditional delivery methods as they use electric power, reduce carbon emissions and also help alleviate traffic congestion. Marketing of the product/service should include an emphasis on these key competitive advantages.

Question 6. What are the regulatory requirements for using drones for medical supply delivery in Canada, and how can these companies effectively navigate these requirements to gain a competitive advantage?

Answer 6. Currently in Canada, regulatory requirements for delivering medical supplies via drones are set by Transport Canada. Some of the requirements include: drone pilot certification, drone registration, compliance with Canadian Aviation Regulations, there are also privacy and data protection issues. A special flight operations certification (SFOC) may also be required for some deliveries. These companies need to spend time and money to be up-to-date on the regulations to ensure proper compliance.

2.1 Concept Check Question 1: What is marketing strategy and why is it important to companies?

Answer 1: Marketing strategy is defined as the managerial process of creating and maintaining plans of action that facilitate exchanges that have value to both customer and company. Marketing strategy is important—if not critical—to the success of a company, as it largely involves the customers that determine the profitability of a company. A failure on behalf of marketing strategy to successful encourage profitable exchanges will ultimately mean failure for the company as a whole.

Question 2: What role does marketing play in the company?

Answer 2: Marketing is a functional unit in the company, in the way that accounting, human resources, and operations, among others, are units within the company.

Specifically, marketing is responsible for strategy, development of a plan to align with that strategy, and finally, executing the actions that increase the likelihood that customers will participate in exchanges with the company.

Question 3: Define mission statement and explain why it is important for organizations to have one.

Answer 3: A mission statement is the definition of a company‘s business focus that provides direction for the company. A good mission statement takes into account what customers—both present and future—may want in an exchange. It can also account for potential market trends, as well as changes that made occur due to environmental forces.

The importance of a mission statement in a company can be illustrated by what can happen if this is NOT executed properly. Examples from the text that help to illustrate

what not having a comprehensive and forward-looking mission statement can do to a company‘s ultimate success involve the early stages of the cell phone industry, specifically Nokia and Blackberry. Both were at one point hugely successful but didn‘t think broadly enough and as a result, suffered and are no longer relevant. Discussion of ―marketing myopia,‖ as it relates to mission statements can be helpful in this context.

Question 4: What is a competitive advantage? Does it have to be based on physical product differences?

Answer 4: Competitive advantage is simply put: advantage over competitors that is gained by offering greater customer value. A competitive advantage occurs when a company can offer something that others cannot. This should be an important goal of marketing strategy (referred to as product differentiation). To establish a competitive advantage, marketers should determine how their company is different than competitors, and how that difference we help to offer increased value to their target demographic. This difference can be physical in nature, but many times is rooted in perception, not necessarily tangible differences.

Question 5: What is a brand and why is a brand important?

Answer 5: Brand—in terms of marketing—is the collection of perceptions tied to a specific product that differentiates it from others. Brand results from a carefully crafted marketing strategy and communicates a specific collection of benefits to customers. The goal of a successful branding attempt is to develop customers loyal to that brand, that is, when customers view a specific value offered by that company as a competitive advantage.

Marketing Planning LO 2.2 Define the elements of marketing planning.

After establishing the need to first establish goals, students are then introduced to the elements of the planning process designed to achieve those goals.

Situation Analysis Discuss a SWOT analysis (display Table 2.2). Use examples to describe each item in the model and then ask the class for other examples.

After the situation analysis is completed, marketing objectives need to be set. These state what is to be accomplished through the marketing efforts. Discuss examples of objectives and whether they are specific, realistic, time bound, and measurable.

Discuss the ‗Ethical Dilemma‘ given in the chapter. Scenario: You work for an event planning company that helps companies design and setup events in your local community. This year, one of the events you are working on is a 5k walk for a national association focused on fighting diabetes. The event has two primary goals: 1) to raise awareness in the community of the potential harm diabetes can have, especially among children due to poor nutrition and unhealthy eating, and 2) to raise funds to help support efforts in the local community related to diabetes awareness.

You have been approached by one of the local franchise owners of a fast-food company who is offering to provide food for the walk for participants as well as donate $10,000 to the local chapter for diabetes prevention advertising. On one hand, you know providing food at the event will increase participation and the $10,000 is the largest donation you have been offered for the event—both definite positives for achieving the overall goals of the event. On the other hand, you know fast food has been linked to the increase in prediabetes in children. Should you accept the food for the event and $10,000 donation or should you politely thank the fast-food franchise owner and look elsewhere for support?

The Marketing Plan A marketing plan is a written document that guides marketing activities. The common elements in the marketing plan are included in Figure 2.7, and sample plan outlines are included in WileyPLUS. Display and discuss the elements in Figure 2.7.

Author Podcast 2.2 Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. A key component of creating competitive advantage is: a. pricing below one‘s competitors b. having a dedicated sales force c. bundling the core product with other products under the same brand

d. understanding the assets (value) the product or brand already has 2. The company Andrew Loos discusses in this segment: a. thought they needed to rebrand in order to attract millennials as customers b. was steadily losing market share and needed to rebrand c. was fairly new in the market and needed a strong brand identity d. was looking for a unique way to package the product.

3. The example company didn‘t understand that: a. they needed to stick with their verified customer base. b. Millennials hold authenticity as a key value. c. they were in the maintain phase of their product life cycle. d. they needed a new director of marketing.

4. Part of the rebranding Andrew‘s group did for the example company was to: a. tell the company’s story on the package itself b. launch a major ad television ad campaign c. find new retail outlets for the product d. suggest ways of improving the product to make it more appealing to millennials Discussion Questions 1. What was the misconception the company had about reaching millennials as a new market segment?

2. What are two things Andrew‘s group did to reach the new target customers with the company‘s story?

3. What is meant by the term competitive advantage?

2.2 Concept Check Question 1: What is a situation analysis and what are the elements of a SWOT analysis?

Answer 1: A situation analysis examines the details of a situation and determines the possibilities, as well as setting constraints, of marketing activities. A SWOT analysis identifies internal (S)trengths and (W)eaknesses, and external (O)pportunities and (T)hreats. Further discussion of a SWOT analysis can be illustrated by either creating a fictional or existing company, or by going through the SWOT analysis of the company LUSH, shown in Table 2.2:

Question 2: What is the purpose of a marketing plan, and why is it important?

Answer 2: A marketing plan is a document that guides marketing activities. The plan must include all needed information to inform marketing decisions, such as: identifying target customers, pinpointing specific marketing objectives, calculating a budget, identifying a timelines, and defining specific marketing actions needed to accomplish goals.

Question 3: What is the marketing mix and what are the four key elements (four Ps)?

Answer 3: The marketing mix is the combination of tools/activities used to encourage and facilitate exchanges, by delivering value to customers. There are four traditional areas of the mix that are often referred to as the 4 Ps: product, place, price, and promotion. Product refers to what the company offers the customer in the exchange; Place refers to when and where the product will be available to customers; Price refers to the physical cost of the product that the customer will pay; and Promotion refers to the way that the company will communicate the value to the customer.

Marketing Implementation and Control LO 2.3 Outline the key issues for implementing and controlling the marketing process.

Marketing plans must be implemented properly in order for the business to be successful, and the plan needs to be controlled and monitored on a regular basis. Once a detailed marketing plan has been created, it needs to be implemented correctly to increase the likelihood of success.

Implementation Implementation is actually putting the plan into effect. Who will do what and when? How will things be done? Implementation includes detailed action assignments, descriptions of the specific activities required in the plan, timelines for completing the activities, budgets for the specific activities, and reporting and completion goals.

Discuss the 3 safeguards for implementing the plan - assign tasks to specific people, set expectations, communications and reporting protocols. Develop examples for each of these items. Ask the class if there are other suggestions that would help secure successful implementation of the plan.

Discuss measuring the performance of a plan with the Return on Investment. Use the ‗Applied Metrics‘ feature: One of the most important metrics for measuring performance is Return on Investment (also known as ROI). ROI represents the percentage of net profit return on an investment. In other words, ROI measures how much you gained for a specific amount of money put in. To calculate ROI, you divide net profit by the amount invested and then multiply by 100% to get the percentage return on the investment, so ROI=(Net Profit/Investment)x100%. Consider the case where a marketing manager is comparing two different ad campaigns and has the following results:

Profit Marketing Investment Return on Investment?

Ad A $10,000 $5,000 200%

Ad B $5,000 $2,000 250%

Discuss the return on investment for each Ad campaign. If the goal was to achieve at least a 200% ROI on ad spending, which of these campaigns would be judged as most successful?

Plan Evaluation and Control A marketing plan has to have a control structure that monitors performance as it is ongoing to detect problems as they arise and correct problems while there is still time to make the plan a success. A tool to help control the implementation of the plan is a

marketing dashboard. It is a snapshot of key marketing performance measures in a single display used to monitor strategic marketing performance. A marketing dashboard provides current diagnostic information about the current performance in several key marketing performance dimensions. Display and discuss key metrics presented in the sample dashboard in Figure 2.8.

Another tool to help control the implementation of a plan is the marketing audit – a comprehensive investigation of the full marketing mix or a subset of the mix (even a single activity) with the intention of checking for problems and uncovering reasons a marketing activity is not performing as effectively as expected.

Author Podcast 2.3a and 2.3b Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. According to Andrew, what is a possible negative consequence of personnel turnover on a marketing team? a. The remaining team members have more work. b. It can take a long time to fill the position. c. If there are no safeguards, the goals for a product can be lost. d. The marketing team will have to be reorganized.

2. The person responsible for ensuring that the goals for a product are met is:

a. the CEO of the company b. the director of marketing c. the manufacturing manager d. the product owner 3. Andrew uses the term alignment when he describes a factor of successful implementation of a marketing plan. What does he mean by this? a. Everyone on the team needs to know what the goals and key performance indicators for a product are. b. Everyone on the team needs to have the same background. c. Everyone on the team needs to be a product owner. d. Everyone on the team should have worked on a similar product in the past.

4. Which of the following do the authors identify as a risk in relying too heavily on dashboards? a. People can enter dashboard data incorrectly. b. Dashboard technology can crash. c. Competitors can gain an advantage from unauthorized access to a dashboard. d. Analytics can be calculated incorrectly.

5. Marketing dashboards provide valuable information about the status of a product/marketing campaign, but it‘s important to remember that: a. dashboard information is valuable only to the marketing team. b. dashboards have to be revised monthly. c. dashboards are not one size fits all. d. dashboards contain data but not conclusions.

6. What solution do the authors offer to the challenge of a dashboard ―serving too many masters‖? a. Companies can restrict employee access to dashboards to those only at manager level or above. b. Companies can turn to alternative tools other than dashboards. c. Companies can outsource the creation and maintenance of their dashboards. d. Companies can build multiple instances of the dashboard based on who needs to see the data.

Discussion questions 1. Describe the role of the product owner.

2. What are two of the safeguards that should be in place to ensure successful implementation of the marketing plan?

3. Define Key Performance Indicators (KPIs).

2.3 Concept Check Question 1: How is a marketing plan implemented?

Answer 1: Implementation is simply putting the marketing plan into effect. In includes things such as: detailed action assignments, descriptions of specific activities required in the plan, timelines for completion of those activities, budgets, reporting, and the completion of goals. Although there are ways to set forth upon implementation in a

straightforward way (the more detailed and thorough, the better), there also needs to be consideration given to problems that can arise—some unpredictably so. The more consideration given to things than can go wrong, the easier it is for marketers to plan to avoid potential negative impacts.

Question 2: What is meant by having safeguards as part of an implementation strategy?

Answer 2: Safeguards are put in place to mitigate the aforementioned problems that may arise during implementation. There are three primary safeguards: 1) Action items should be assigned to a specific person or team (this decreases the changes that an action item will be neglected or forgotten and can also reduce potential conflict over who has authority in regards to that action); 2) Set expectations for time, budget, and performance level (this includes directly tying incentives or negatives consequences to these expectations); and 3) Developing and enforcing communication and reporting protocols during plan implementation (this can be achieved by establishing regular reporting schedules and formal communication guidelines around action items).

Question 3: Describe a marketing dashboard. When and why are they used?

Answer 3: A marketing dashboard is a tool that can be used to monitor implementation and performance. It is a snapshot of key performance measures related to marketing implementation and is displayed in a single image/table/quick at-a-glance report. This is a tool meant to provide a quick summary of performance, not necessarily extremely detailed measures and notes. In this way, a marketing dashboard is similar to a car dashboard. They are used to monitor progress in real time and adjust accordingly. To be most useful, it should be based on variables that the marketing manager has determined are important to meeting specific objectives.

Question 4: Explain the definition and purpose of a marketing audit.

Answer 4: A marketing audit is a comprehensive investigation of the full marketing mix, or even a subset of the mix, designed with the intention of uncovering problems and reasons for things like lack of performance in a marketing activity. An audit can uncover the root cause of problem and can therefore help to inform potential solutions or strategies for correcting problems.

Application Questions 1. Find an example of a good mission statement and a bad mission statement. What are the main differences?

Answer: Student answers will vary. Good mission statements should clearly and concisely indicate what the company is about by taking into consideration what present customers and future customers might want in an exchange. It should also account for potential market trends and changes due to environmental forces. Bad mission statements often fail to account for both the customer side of the business as well as the potential market forces in the future. In addition, they can be too long, overly general or overly specific and can be confusing to the reader.

2. Choose any market you are familiar with and pick two brands you know. Describe the perception of each brand.

Answer: Student answers will vary.

3. Coca-Cola and Pepsi are viewed as similar in many ways. Can you think of a competitive advantage for each of them?

Answer: Student answers will vary. As number 1 in the market, Coca-Cola has a competitive advantage in its international brand recognition and market reach. In addition, the company is said to have a greater amount of brand loyalty. Coca-Cola keeps their recipe a secret and claims a competitive advantage in their unique taste. Pepsi on the other hand has a competitive advantage in this distribution capabilities within the US. In addition, the company owns several large restaurant chains which serve their products exclusively. Pepsi has also claimed a competitive advantage with the taste of their product and for several years challenged consumers to a taste test in which they claimed they would win.

4. Choose a product or service that you use frequently. Analyze how the company behind the product or service effectively utilizes the 4Ps (Product, Price, Place, and Promotion) in their marketing strategy. Provide specific examples for each of the 4Ps. Answer: Student answers will vary depending on the chosen product. However, students should discuss the 4Ps: product, price, place and promotion.

5. Consider a well-known fast-food chain. Discuss how the company adapts its 4Ps marketing mix to different international markets. Provide example of how the Product, Price, Place, and Promotion strategies differ across various countries or regions.

Answer: Student answers will vary. Different international markets require different marketing plans. Companies will need to adjust the promotion of products or services

based on the demand and the public perception in those areas. The impact on the 4Ps because of differences in culture, language, and regulations will need to be considered.

6. What is the unique selling proposition of your university or college program?

Answer: Student answers will vary. At a small liberal arts college the unique selling proposition might be a low student/teacher ration or a personalized learning approach. At a large university the unique selling proposition could be their state-of-the-art research facilities, the calibre and publishing power of their faculty or the breadth of their alumni network. Today most schools regardless of size include their job placement capabilities.

7. How do marketing audits and marketing dashboards complement each other in the process of evaluating and optimizing a company‘s marketing strategy? Provide examples of the types of insights each tool can generate and how they can inform decision-making.

Answer: A marketing dashboard is a snapshot of key marketing performance measures in a single display used to monitor strategic marketing performance. A marketing dashboard provides current diagnostic information about the current performance in several key marketing performance dimensions. A marketing audit is a comprehensive investigation of the full marketing mix or a subset of the mix with the intention of checking for problems and uncovering reasons a marketing activity is not performing as effectively as expected. Marketing dashboards provide a quick snapshot or summary of the current state of performance for key marketing indicators. When more comprehensive information is needed a marketing audit is the tool to use. Marketing dashboards and marketing audits are used to uncover marketing problems with the goal of marking marketing more effective.

8. Explain the importance of conducting regular marketing audits and maintaining an upto-date marketing dashboard for a company‘s long-term success. How can these tools help identify opportunities for growth and areas in need of improvement in the marketing strategy?

Answer: While marketing dashboards provide a quick snapshot or summary, a marketing audit is a more thorough investigation of the marketing activities and performance effectiveness. Regular audits and up-to-date dashboards assist a company in quickly discovering and correcting any marketing problems. A timely response allows companies to adjust and improve the marketing strategy efficiently and effectively.

9. How can a marketing dashboard be used to easily identify important measures of success? List three measures of success you would want to have on your company‘s dashboard.

Answer: Student answers will vary. A marketing dashboard offers the marketing manager a summary of performance indicators for key marketing variables. It can be used to assess current activities but is limited for future planning. Samples of indicators a person

might choose to have on a marketing dashboard include but are not limited to: sales, trials of a new product, hits on a web page, numbers of respondents to different marketing activities, or tweets about a recent ad.

Discussion Questions 1. A company mission should provide focus for the organization. How do companies with a philanthropic mission (TOMS, Maple Leaf Foods, etc.) reconcile the fact that they make a profit while still having a social agenda that is built on charity and giving?

Answer: Profit and social responsibility are not always separate goals. Socially conscious companies donate a portion of their profits to a specific philanthropy or cause and their mission statement should focus on how they conduct their business and acknowledge where profits are being spent. The mission statement should make this relationship clear.

2. Is it ethical for a company to use its social mission to make a profit? How much profit is acceptable to you? 10%? 20%? 50%? Explain your answer.

Answer: Student answers will vary.

3. It has been said that a plan is nothing, but planning is everything. How does this relate to the concept of a marketing plan?

Answer: Student answers will vary. A plan is an idea, and all ideas require execution.

Successful execution cannot happen without careful and deliberate planning. The marketing plan is a document laying out how the marketing ideas will be executed.

4. What are the advantages and disadvantages of having someone outside the company such as a consultant play a major role in developing an initial marketing strategy?

Answer: Student answers will vary.

Advantages to using a marketing consultant as opposed to inhouse staff can include but are not limited to the following:  Consultants offer specialized assistance that may not be available to a company inhouse.  Companies can gain an outside perspective on their business.  Consultants can be a cost-effective strategy for short term goal setting projects and do not require benefits or long-term investment.

Disadvantages to hiring a marketing consultant can include but are not limited to the following:  Consultants often come at a high price.  The company can struggle with quality control when utilizing consultants and should depend on referrals to hire the right person for the job.

5. Does a competitive advantage have to be a real advantage or is perception enough?

Explain?

Answer: Student answers will vary.

Running Case This Saves Lives (TSL) Video Please note: Video Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-Choice Questions 1. The first flavour developed by TSL was: a. Madagascar vanilla and honey b. blueberry and pistachios c. salted caramel d. dried cherry and cashews 2. The founders were told that they needed to launch their bars with at least: a. three different flavours b. four different flavours c. five different flavours d. six different flavours 3. The packaging includes the product name (This Saves Lives), which suggests: a. the nutritional value of the bar b. the story of the product c. the uniqueness of the product d. the mission of the company 4. The clear plastic wrapper suggests: a. the healthy nature of the product b. the fact that the packaging is environmentally friendly c. the transparency of the company’s mission d. the desire to have minimal packaging Discussion Questions 1. Describe the process the TSL founders followed to come up with the first bar flavour.

How did they decide on the next few flavours?

2. What suggestions do you have for making their packaging more attractive?

3. How does the TSL packaging compare with that for other energy bars?

Running Case This Saves Lives (TSL) Questions Answers might include the following: 1. What is the unique selling proposition for TSL? TSL is a premium, great tasting snack bar that allows customers to participate directly in a social cause through its Buy One Give One (BOGO) program to help address severe malnutrition among children.

Note: The key for instructors is to make sure students don‘t focus only on the bar itself OR the BOGO program and social cause alone. TSL‘s mission is to link the two so customers feel good about doing something positive when they purchase.

2. What are the basic ideas behind the marketing strategy for TSL? *make a great-tasting bar from premium ingredients *use celebrity appeal to sell it *focus on the mission: to help children with acute malnutrition return to health 3. How do you think TSL’s marketing objectives might differ from those of another snack bar company? How would the TSL team define success for the company? (a) Differing objectives include: *target market segment might be somewhat different *marketing campaign can include a social mission to help fight malnutrition *marketing campaign may include celebrities (b) *The founders should establish metrics for evaluating success. Those might include revenue goals, placement in X number of stores by a certain date, reorders from X percent of their outlets, among other factors.

Note: Instructors might want to stress the fact that TSL wants to maintain a higher price, not only to communicate quality, but also so they have enough margin to be able to achieve their social mission objectives.

4. Given that the founding team is composed of actors, how can the group use their celebrity to help achieve their mission?

Two examples were given in the running case narrative: exploit Kristen Bell‘s social media status and exploit in-person opportunities like South by Southwest. They can look for similar opportunities.

Note: A good point for discussion or at least mention is that Kristen Bell‘s celebrity status is a double-edged sword. The more popular she is, the more TSL can leverage her celebrity for promotion and visibility. However, the more popular she becomes, the more commitments she has and the less time and energy she might have for TSL activities.

Stars are only stars as long as they work to maintain the stardom. Same is true to a lesser extent for the other partners.

5. Is a BOGO strategy a sustainable competitive advantage for TSL? Why or why not?

*It will likely become more difficult over time, since a current or new competitor could adopt a similar BOGO strategy. The founders need to develop a longer-term plan that includes a contingency plan for such an event.

Note: This question offers a good opportunity for instructors to ask students if they know of other bars with social agendas. One effective option is to have students look this up live or online either prior to class or during class via technology.

Application Exercise Mission statement: TSL is dedicated to providing delicious snack bars made from the highest-quality ingredients while helping children suffering from malnutrition through their buy one/give one program.

Note: Similar to the unique selling proposition question, instructors should point out the mission is to provide customers the benefit of a premium snack that also makes them feel good about doing something positive when they purchase.

Chapter 3 The Marketing Environment The Marketing Environment LO 3.1 Discuss the two major components of the marketing environment—the microenvironment and the macro-environment – and the key distinction between the two for marketers.

The Micro-Environment Market Company Customers Competitors Suppliers Intermediaries Publics LO 3.2 Identify the seven main components of the micro-environment.

The Macro-Environment (SPENT) Social/Cultural Political/Regulatory/Legal Economic/Financial Natural/Environmental Technological LO 3.3 Identify the five main components of the macro-environment.

Chapter Introduction

This chapter follows up on the marketing planning process that was introduced in Chapter 2 by detailing the marketing environments—the influences on customers and the planning process. In LO 3.1 the chapter introduces the concept of the marketing environment then distinguishes between micro and macro environmental elements.

Micro-environmental elements are detailed in LO 3.2 and macro-environmental elements are detailed in LO 3.3. Students should understand that this structure helps set the research effort needed for good thinking and planning.

Industry Expert Video Melissa Alvares, VP Marketing, MindBeacon, Toronto Ontario Please note: Video Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-choice Questions 1. How many people who have mental health issues won‘t reach out for help? a. two-fourths b. one-third c. two-thirds d. three-quarters 2. What is a big challenge with marketing mental healthcare? a. you need evidence to make claims b. customers aren‘t receptive to marketing messages c. you can‘t use testimonials d. you can‘t compare your organization to competitors 3. In an organization, which role does a marketer need to be effective in communicating with? a. CEO b. CIO c. CFO d. CMO 4. What does a marketer need to be successful? a. communication skills b. empathy c. analytical skills d. industry knowledge Discussion Questions 1. What barriers may prevent people from reaching out for help with mental health issues?

2. What challenges exist in the marketing of mental healthcare?

3. How can you prepare for a career in marketing?

The Marketing Environment LO 3.1 Discuss the two major components of the marketing environment—the micro-environment and the macro-environment – and the key distinction between the two for marketers.

Marketing managers have to make decisions taking into consideration both controllable and uncontrollable factors. We call the combination of controllable and uncontrollable forces that affect a marketing decision the marketing environment. After presenting the definition, ask the class for examples of forces that are affecting marketing decisions for a particular industry - say electric powered automobiles. Answers might include customer attitudes, government regulations, price of gasoline etc.

The micro-environment, sometimes referred to as the internal environment, includes anything in the environment close to the firm that directly affects or is directly affected by the marketing manager‘s decisions. Ask the class to list environmental forces affecting Tesla or Ford. Answers might include suppliers of batteries customer attitude toward the ownership.

There are some elements in the environment that are more general trends the company does not directly influence. These elements are part of the macro-environment, sometimes referred to as the external environment. These elements have a more indirect impact on the company‘s marketing strategy. Population trends, social and cultural beliefs, etc.

Author Podcast 3.1 Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Jasmine Bina says that an analysis of environmental factors is easy to do when you look at things on paper. What is an example of a factor that can be considered on paper? a. past history of sales b. comparison of price versus competitors c. purchasing behaviour of customers d. analysis of hits on social media.

2. What environmental factor did Honest Diapers notice that gave them an entry into a market controlled by two giant companies? a. More new parents were turning to cloth diapers. b. Millennials no longer relied on recommendations from their parents. c. New parents weren‘t as price sensitive as previously thought. d. New parents like having colour choices for diapers.

3. In addition to taking market share from Kimberly-Clark and Proctor & Gamble, Honest Diapers forced them to address: a. the price the older companies could charge

b. the variety of products they offered c. the new role of social media in advertising. d. the need to be environmentally sustainable 4. Jasmine says that Honest Diapers made a product that was eco-safe, baby-safe, and: a. economy priced b. luxury priced c. only available for purchase online d. only available at high-end baby stores Discussion Questions 1. What environmental factor(s) were key to Honest Diapers‘ success?

2. What are two or three reasons it would be difficult for a large company like KimberlyClark or Proctor& Gamble to produce an eco-safe, baby-safe diaper in the short term?

3. What was the impact of Honest Diapers in the baby diaper market?

3.1 Concept Check Question 1: What is the marketing environment? If someone said it includes everything, how would you respond?

Answer 1: The marketing environment is the combination of controllable and uncontrollable forces that affect a marketing decision. Upon initial consideration, it may seem that this essentially means that the marketing environment is everything, however, it‘s quite a bit more focused than just ―everything.‖ The marketing environment includes anything that influences or is influenced by decisions made to facilitate an exchange. This broad definition applies mostly to the positions of either the individual company or a specific manager. The marketing environment is split into the micro- and the macroenvironment.

Question 2: What is the difference between the micro-environment and the macroenvironment? Which is more controllable?

Answer 2: The micro-environment is sometimes referred to as the internal environment and includes anything that directly affects or is directly affected by the marketing manager‘s decisions. In the example of Ben & Jerry‘s, decisions about flavours, ingredients, prices, and how to persuade customers to buy their ice cream, instead of another brand‘s, are all part of the micro-environment. The macro-environment, on the other hand, is the external environment, and includes elements that have an indirect impact of the company‘s marketing strategy. In the example of Ben & Jerry‘s, this includes things like population trends, social/cultural beliefs, legal matters, etc. The micro-environment is largely more controllable than the macro—most factors of the external environment are things that can be tracked and studied but may be hard to directly alter or affect in any real way.

The Micro-Environment

LO 3.2 Identify the seven main components of the micro-environment.

Market The most basic element of the micro-environment is the market itself. A market is a collection of buyers and sellers interested in making similar or related exchanges. Ask the class to describe the market for automobiles. List all the venders and different offers to the mix of buyers. As the class for examples of established markets with relatively stable competitors and customers and evolving markets that have unstable competitors and customers. Discuss "why an evolving market presents more risks". Answers might include... it is less clear what marketing strategies will work with customers new to the product when compared to established markets. Consider selling cars in China to selling cars in Canada. Ask the class for more examples.

Company The company is the most directly controllable of all the potential influences on an exchange. List all the things that the company can control ... employee skills, etc. ask the class for examples for a specific business like a restaurant.

Customers The most important micro-environment element is customers. Ask the class why this statement is true. Discuss how the business tries to attract and gather their customers.

Discuss the different types of customers including end consumers (purchase products to use personally) and resellers (buy the product to exchange with others). Companies strive for market share (sales of one brand divided by total sales in the market). Ask the class if they are loyal to any brands.

Review the ‗Applied Metrics‘ in the chapter: One of the most important measures of company performance is market share. Market share is defined as the company‘s sales (in units or dollars) divided by the total sales (in units or dollars) of the market. Zhara is a small business owner who is trying to determine how well she is doing in the market. Her handmade jewelry store sold 100 pieces of jewelry last month with total sales of $10,000.

She knows there are two main competitors in her local market. One competitor is about her same size but sells less expensive jewelry, while one is considerably bigger with more staff and in a better location for walk in traffic, but also sells less expensive items.

She estimates sales of the similar store were 100 pieces, but total sales were $5000 for the month since the prices are lower in that store. The larger competitor she estimated sold 800 pieces of jewelry and had sales for the month of $45,000. She also knows there is store that is a little outside her market that sells inexpensive jewelry but also sells other merchandise. That store she estimates sells about 1000 items a month and has sales of about $40,000. The information is summarized in the table:

Zhara Similar Store

Units 100 100

Dollars $10,000 $5,000

Larger Store Outside Store Total Sales w/o Outside Store Total Sales including Outside Store

800 1,000 1,000 2,000

$45,000 $40,000 $60,000 $100,000

Zhara market share w/o Outside Zhara market share with Outside

10.00% 5.00%

16.67% 10.00%

Discuss the market share of 10% of the units or 16.67% of the dollars excluding outside her area versus 5% of the units or 10% of the dollars including outside her area. Ask if it makes a difference if you use units or dollars? Or if you should include the store just outside her area? Talk with students about the market Zhara is in and which stores would be considered competitors. Ask students which store is doing better?

Competitors Define and distinguish between primary (with brands in the same market targeting the same customer group) and secondary competitors (substitutes). A third, less common but in many ways more dangerous competitor is an unexpected competitor. An unexpected competitor offers the same core benefit but with an entirely different product.

Ask the class to give example of each type of competitor.

Suppliers Suppliers—companies that provide materials or components that are used in final products the company exchanges. Discuss the possible issues related to dealing with various suppliers - service level, quality of product, price etc. Ask the class to list suppliers to any automobile manufacturer.

Intermediaries Companies that perform functions that help connect the company to the customer in some way are referred to as marketing intermediaries. Examples, financing for customers, advertising and research agencies. Ask the class how intermediaries contribute to the overall marketing plan. For example, with customer financing from an intermediary, there might not be a sale.

Publics Publics include groups not directly involved in the business that have an interest in the specific market for one reason or another. Consumer groups, specific government oversight groups or agencies, investors, and others that take an interest in the market can all be considered publics. Note that one of the most important publics groups is investors that evaluate company practices. A growing trend with investors is closer scrutiny of a company‘s environmental, social, and governance (ESG) practices. Discuss the publics that are interested in a particular business such as transportation.

Author Podcast 3.2 Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Traditionally, primary competitors are those that: a. produce complementary products. b. target the same customers as your product or company. c. are willing to form partnerships with your company for distribution. d. compete directly with other of your competitors but not with your product.

2. According to Jasmine, the greater accessibility of factors like distribution, ecommerce, and manufacturing means that: a. barriers to enter a new market have been lowered. b. it is easier to produce a low-cost product. c. defining the target market is less important that it was a decade ago. d. supply chains are less complicated now than they were a decade ago.

3. Given that it is easier today for companies to enter a new market, Jasmine advises her clients to: a. have regular brainstorming sessions to come up with new product ideas. b. spend more time developing brand identity c. consider any company that is looking at the same future as your company to be a competitor. d. project which products will be obsolete in five years.

4. Jasmine explains that Google and Microsoft are examples of companies that: a. continue to build and sell complementary products. b. have traded places, in that Microsoft now has more web applications and Google has more hardware. c. have managed to maintain their dominant position in their respective markets. d. once produced complementary products but now are competitors.

Discussion Questions 1. Explain how barriers to entry into a new market have been lowered in the last few years. Give an example of company or product that fits this description.

2. What, according to Jasmine Bina, is the key characteristic of a primary competitor?

3. Why did Kodak, which once owned the film market, fail?

Mini Case 3A Question 1. Who do you think is ultimately responsible for food allergens and accuracy in a case like this? The supplier? The manufacturer? The retailer?

Answer 1. Responsibility rests with the company producing and selling the product.

However, they do rely on the supplier of the ingredients to provide an honest and full description of those ingredients.

Question 2. How do you think these events will affect loyal Daiya customers versus switchers when they buy non-dairy frozen desserts in the future, and how long will the effects last?

Answer 2. If Daiya provides honest information, explains what happened, and fixes the problem, most loyal customers will be likely to keep purchasing their products. Switchers may be more likely not to purchase them. However, in these situations, effects are likely short-term in nature. Loyal customers who decided not to purchase from Daiya are likely to revert to Daiya in a few months.

Question 3. If you owned a grocery store and Daiya was one of your most popular nondairy frozen brands, what would you do if something like this happened?

Answer 3. The products would be removed from shelf and recall notices posted in store and online. Products would remain off shelf until the issue was fixed. Then, the products could be re-stocked and sold.

3.2 Concept Check Question 1: List the key elements of the micro-environment and provide an example.

Answer 1: The key elements of the market are the market itself, the company, the customers, the competitors, and the suppliers. Using the text‘s example of Chapman‘s ice cream, the market is the general group of people and companies participating in the exchange (i.e., Chapman‘s and customers who wish to buy their ice cream); the company is Chapman‘s; the customers are the people who wish to buy the cream—and who have the most significant impact on the exchange; competitors may be Breyer‘s, Ben and Jerry‘s, and Haagen Dazs.

Question 2: Which of the micro-environment elements is considered the easiest to control?

Answer 2: The company is the most directly controllable element.

Question 3: Which element of the micro-environment is the most important?

Answer 3: Customers are the most important element of the micro-environment.

Question 4: What is the difference between primary and secondary competitors?

Answer 4: Primary competition describes brands in the same market who target the same type of customer group. Examples include McDonald‘s and Burger King, Apple, and Samsung.

Question 5: What is the difference between a supplier and a marketing intermediary?

Answer 5: Suppliers are companies that provide materials or components that are used to create the final product that a company exchanges, whereas a marketing intermediary is a company that performs functions that help the company connect the company to the customer in some way (e.g., advertising agencies, research firms, etc.).

The Macro-Environment (SPENT) LO 3.3 Identify the five main components of the macro-environment.

Social/Cultural Culture is the shared beliefs, values, perceptions, preferences, and behaviours of a group.

Culture is influenced by family, friends, and personal interactions and other institutions in the environment such as schools, religion, government, and even businesses. Discuss the many different cultural trends taking place, such as the growth in social media. Ask the class how social media has influenced our culture and specific groups such as teens.

Political/Regulatory/Legal Display Table 3.1 and review the various legislation. Ask the class if any new legislation is required and why. For example, is social media and privacy becoming a concern that requires legislation?

Economic/Financial Display Figure 3.9. Define and discuss subsistence, developing and mature economies and how marketers should deal with each. Discuss the state of the economy in your area and how that might be influencing consumers. Is employment strong and are incomes high? Can consumers readily afford the things they want and need like a house or car?

Discuss the ‗Ethical Dilemma‘ feature in the chapter. Consider the following scenario: You work for a toy company that has been asked to manufacture a toy tied to the latest blockbuster kids‘ movie to sell in retail stores. The movie features vehicles such as cars, trucks, and farm equipment as characters and your company has been contracted to make toy vehicles to represent the main characters in the movie. Your company has experience making similar toys, and you offer the retailer two options for the toys. Option 1 is made primarily of lightweight plastic, costs $.50 to make, and can be sold for $3.00 in the retail store. Option 2 is made of metal, costs $2.00 to make, and would have a price of $3.50 in stores.

You tell the retailer that Option 1 is much more likely to have the wheels fall off when played with much, especially if handled by younger children who are more likely to play rough with the vehicles. If the wheels come off, it represents a choking hazard for younger children who are prone to put things in their mouth without knowing the dangers. The retailer comments, ―Yes, I see your point. We need to take that into consideration. However, the toys are really for children ages 5-10, and the less expensive option makes us more money and will be more affordable to parents, so we will sell more. We will definitely follow the law and put a warning label that these toys represent a choking hazard for children under 5 years old.‖ Though the company has met the legal requirement to include a warning label on the packaging, is this decision ethical? Whose responsibility is it to ensure safety in this situation? Is it the company‘s responsibility to consider safety of those not intended to use the product?

Natural/Environmental The natural or environmental component of the macro-environment from a marketing standpoint primarily includes issues related to natural resources and sustainability.

Sustainability in basic terms means not using up natural resources. More broadly, companies have used the term to refer to efforts to create more environmentally friendly approaches to doing business. Ask students about how some businesses are trying to be more eco-friendly and publicizing their effort with customers other publics. For example, the use of plastic might be noted.

Technological Discuss all the new technologies such as smartphones and driverless cars. Ask students how they will change society?

The paradox of technology is that it offers both benefits and negative consequences at the same time—ask for examples. Benefits and problems with social media might be an interesting class discussion.

Author Podcast 3.3 Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Victoria‘s Secret produced a runway show in China in which the models were dressed as: a. butterflies b. birds c. dragons d. angels 2. The dragon in Chinese culture symbolizes: a. long life b. royalty c. fierceness d. tenacity 3. For the Chinese market, Nike adapted their ―Just Do It‖ campaign to mean: a. be a warrior b. it is difficult to do but follow your own path. c. honour your parents and grandparents. d. follow the path of your parents.

4. Some companies entering the Chinese market have assumed: a. that marketing isn‘t as important in this culture. b. that it’s one big, homogeneous market.

c. that Chinese people are especially price sensitive d. that most Chinese people don‘t respond to social media.

Discussion Questions 1. Explain how Victoria‘s Secret was ―tone-deaf‖ when they chose dragons as the costumes for their models.

2. How did Nike do a better job with their marketing campaign, even though they kept the ―Just Do It‖ tagline.

3. Why is it important to consider the culture when you enter a market in a country other than the U.S.?

Mini Case 3B Question 1. What have been some of the key challenges for cannabis retailers in your province?

Answer 1. Answers will vary by province. It could include make it less visible to minors, educating consumers on products available and use.

Question 2. Are you familiar with CBD? If so, which brands? Which product formats?

Answer 2. Answers will vary by student.

Question 3. Can you think of how some retailers might segment their customers?

Answer 3. Segmentation could be based on product use, which could correspond to age in some cases.

Question 4. Does the government model work better than the private retail model in the provinces? Will the provincial governments end up opening cannabis retail locations like the Liquor Control Board of Ontario in Ontario, the BC Liquor Stores in British Columbia, and the Société des alcools du Québec in Quebec?

Answer 4. Opinions differ on this issue. When governments have a monopoly on the product, regulation is easier, however, lack of competition does not improve the customer experience. Some provinces are considering moving from a government to private model and vice versa.

Question 5. How socially accepted is marijuana in Canada since legalization?

Answer 5. Sales of cannabis have increased, but there is not significant product use in the majority of the population. It takes a great deal of time for changes like these to become socially acceptable.

Question 6. While Canada has legalized marijuana, there are many other countries where it is still illegal. For example, Canadians working in the cannabis industry come under severe scrutiny when travelling into the US, since Cannabis is still illegal there. Might there be other global consequences?

Answer 6. The perception of Canada could change. Compare what you think about Amsterdam since cannabis use is legal there. However, Canada‘s image is fairly strong.

Unless there are changes in Canadians that align with cannabis use, there may be not a significant image change.

3.3 Concept Check Question 1: List the key elements of the macro-environment and provide an example.

Answer 1: SPENT: Social/cultural (different generations are receptive to different types of products and marketing; increasingly diverse Canadians impacts types of products) Political/legal/regulatory (laws regarding competition, product safety, pricing, advertising, and privacy), Economic (financial and monetary influences; developing economy will produce more than it consumes, mature economy has transitioned into a service economy and stable industry), Natural/environmental (sustainability and use of natural resources has become focal point for consumers), Technological (widespread use of internet and apps has changed ways companies interact with customers) Question 2: Which of the macro-environment elements is most closely related to our understanding of customers?

Answer 2: The social/cultural element of the macro-environment most closely relates to the understanding of customers.

Question 3: What is the primary goal of the laws that most closely affect marketing practice?

Answer 3: The primary goal of laws that effect marketing practice is in keeping customers safe and competition far. Both the Canada Consumer Products Safety Act and the Food and Drugs Act protect customers from unsafe products, and the Competition Act prevents misleading or false advertising and aims to ensure fair competition between companies.

Question 4: What is the difference between income and wealth?

Answer 4: Income is how much money a person receives from earning and other sources, whereas wealth represents how much a person has accumulated in financial resources over time.

Question 5: What is sustainability and how is it related to the natural environment?

Answer 5: Sustainability simply means not using up natural resources. Sustainability has become increasingly important to consumers, and therefore companies, and many companies are addressing this by focusing on things like renewable energy, recycled materials, and an overall reduction in their carbon footprint.

Question 6: What is the paradox of technology?

Answer 6: The paradox of technology refers to the fact that technology offers benefits and negative consequences simultaneously. An example of this is in something like customer reviews of a product or service: technology has made it easier for customers to voice their opinions/reviews of a company or product, however those same reviews can make it overwhelming or difficult for other consumers in that there is then too much information available about a product or service.

Application Questions Question 1: Identify an industry that has transitioned from an established market to an evolving market due to technological, economic, or social changes. Analyze the factors that contributed to this transition, and discuss how companies in this industry have adapted their marketing strategies to remain competitive.

Answer 1: Established markets have relatively stable customers and competitors, whereas evolving markets are changing rapidly and do not have stable customers or competitors.

Student examples may vary, but one such industry is the music industry. Technology has changed significantly in the past number of years which created the need for the music industry to move to an evolving market. With digital music platforms, the ability to stream services and online distribution channels, companies in the music industry had to adapt to remain competitive.

Question 2: For day-to-day marketing decisions, which is more important, the microenvironment or the macro-environment?

Answer 2: For day-to-day marketing, the micro-environment is more important. Those elements are more granular, easier to clearly identify, and their impact can be instantly noticed in marketing decisions. The macro-environment can be viewed as part of the ―bigger picture‖ and has broader implications towards long term or overall strategy.

Question 3: Choose a company that has faced a significant competitive challenge from an unexpected competitor. Discuss the impact of this unexpected competition on the company‘s market position and performance, and analyze the strategic changes it made in response to this challenge.

Answer 3: Student answers may vary. One such example of a company that faced a significant competitive challenge from an unexpected competitor is Blockbuster. Netflix entered the entertainment industry offering online streaming of movies. With this new competitor, Blockbuster remained focussed on physical locations and rental of movies.

This refusal to adapt to a changing environment resulted in bankruptcy. Another example is traditional taxi companies. These companies faced unexpected competition from Uber and Lyft. To survive, taxi companies had to adopt the same ride-hailing technology or partner with ride-sharing platforms.

Question 4: Which federal Act would handle a complaint about a company making a false food claim?

Answer 4: The Competition Act would handle a complaint about a company making a false claim about food, since it deals with the ways that companies communicate and market to customers.

Question 5: What is the paradox of technology, and what personal examples can you cite to support your definition?

Answer 5: This answer will obviously depend on an individual student. The paradox of technology refers to the fact that technology offers benefits and negative consequences simultaneously. An example of this is in something like customer reviews of a product or service: technology has made it easier for customers to voice their opinions/reviews of a company or product, however those same reviews can make it overwhelming or difficult for other consumers in that there is then too much information available about a product or service. One example might be too much conflicting ―expert‖ information available about a company that overwhelms an investor and stops any decision to invest in the stock.

Discussion Questions Question 1: Customer safety is an important issue. Who should be responsible for monitoring companies to make sure they provide safe products? Customers? Companies?

Government? Other?

Answer 1: Student responses will vary widely, depending on point of view. Some may say customers should be responsible for ensuring their own safety; some may say it is the responsibility of the company to produce safe products or services; some may argue that the role of the government is to set rules and regulations to oversee both companies and consumers.

Question 2: True or false: Consumers have free will.

Answer 2: Those arguing ―true‖ may point to the mixed economy of Canada which provides many options for consumers to purchase in almost all categories of goods and services. Those arguing ―false‖ may point to things like income level dictating what a consumer can and cannot purchase—very poor consumers may have very minimal choices. Others may point to free will being dependent upon the economy—in some places, like Canada, consumers do have free will; however in other places, such as North Korea, consumers have very limited, or no choice at all.

Question 3: You are interviewing for a marketing job and are asked the following question: What is the difference between legal, ethical, and moral choices? How do you respond?

Answer 3: Legal choices are those based on actual law, whereas ethical choices take into consideration what is right versus what is wrong. Morals are similarly related to right and wrong but speak specifically to an individual‘s own principles regarding right and wrong.

Question 4: Privacy is one of the biggest issues facing marketers today. How do you

respond to the statement: ―If you aren‘t doing anything wrong, then privacy isn‘t an issue?‖ Answer 4: Answers will vary widely on students‘ point of view. Some may agree and believe that privacy concerns won‘t matter as long as no laws are being broken and they aren‘t doing anything wrong. Those who do not agree with the statement may offer ideas such as concerns with government surveillance or the concept of consent: some information that may be obtained about consumers may not be freely offered up or could be sold to other companies without the consumer providing express consent or approval in doing so. This discussion question could take many directions and offers an opportunity for lively discussion.

Question 5: Is marketing necessary in a subsistence economy? If so, what would be the purpose?

Answer 5: In subsistence economies, consumers are also producers and vice versa. In some cases, the consumer is consuming all or most of what they produce and rely very minimally on outside sources. In cases where there is a need for products or goods from outside sources (for example, a farmer that produces everything but meat to eat), a consumer may have more than one option to obtain a product from. If there were several options (in the farmer example, perhaps there are three farms nearby that offer beef), the consumer may rely on some very basic type of marketing to sway and exchange (in the example provided, perhaps one cattle farmer explains that his cows are fed a very good type of feed, and therefore the beef is tastier, or more nutritious). In subsistence economies, marketing plays a small role.

Question 6: How would you describe your culture? Does your answer depend on who asks you the question? Why or why not?

Answer 6: Answers will vary widely reflecting students‘ understanding of the question.

Typically, students will define their attachment to the larger culture as well as subcultural association related to say music or religion. As for who asks the question, students will likely respond that it does depend on if the one asking is not connected to the same cultural identities and if the student wants to share or reveal their cultural identities.

Running Case This Saves Lives (TSL) Video Please note: Video Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-Choice Questions 1. The macro-environment for TSL includes: a. reaching an international market for their product b. learning about regulatory issues regarding the giveback. c. factors on both the giveback and the product side. d. issues regarding the ability to scale up production once they are successful.

2. Ryan describes their advertising tactics as ―guerrilla‖ tactics, among them being: a. being face-to-face with as many potential customers as possible. b. going to all the retail outlets where their main competitor bars are sold. c. running videos in Starbucks stores showing the children they are helping d. talking to children as a way of getting parents to buy their bars.

3. Ryan says that he views as his main competitors: a. those bars that are at the top of the food market. b. those companies that focus on premium ingredients. c. those companies that have a giveback program. d. those company that share the vision of TSL. Discussion Questions 1. Describe the customer profile that Ryan outlines.

2. In addition to talking with customers face to face, what are some other advertising strategies TSL employed to launch their product?

3. Identify some similarities between what Ryan says about his main competitors and what Jasmine Bina says in the introductory video about who a company‘s real competitors are.

Running Case This Saves Lives (TSL) Questions Answers might include the following: 1. Which element of the marketing environment do you think it is most critical for TSL to understand if it is to be successful?

It‘s important for TSL to understand all elements of the marketing environment, but as this episode of the running case illustrates, an understanding of macroenvironmental forces—those forces they cannot control—is critical to success. Because the company relies on food products like Madagascar vanilla to make its bars, such uncontrollable forces as weather and crop size play an important role in their business—as they learned.

Other factors that could have an impact on their ability to maintain a production schedule include politics (especially if they are importing an ingredient from a developing country) and regulations, both those of the exporting country and the U.S. Students might also suggest the economic environment since sales of premium snacks might be lower during poor economic cycles.

2. If you were advising TSL in this situation, would you consider temporarily using artificial vanilla until the shortage or at least to meet the pending Starbucks order?

Rather than immediately going to artificial vanilla as a substitute, perhaps TSL should consider alternate suppliers of Madagascar vanilla—perhaps a supplier that doesn‘t meet all the criteria of excellence set by their primary supplier. If the timeline is too short and the TSL team knows little about the reliability of an alternative supplier, perhaps they could substitute vanilla extract—made from real vanilla beans, but less high-quality—as a stopgap for the Starbucks order.

Note: This question can often spark interesting debate and can be easily and effectively used to generate class interaction (even online). One option is to force the issue by assigning individuals or groups to present the best case for using artificial vanilla and another set to present the best case against doing so. The instructor can determine point in the debate or can declare a winner. Alternatively, the class individuals or groups could act as judges. The instructor then becomes the moderator of the debate/discussion asking probing questions.

3. Do you think the economic environment in Canada is conducive to a $3.99 snack bar like TSL? Why or why not? How do you think customers would respond if TSL had to raise the price of each bar by $0.10 per bar to cover the increased cost of vanilla?

As long as the company emphasizes the high-quality, natural ingredients, and the economy does not drop drastically, the environment will be conducive to a $3.99 snack bar. The higher price will limit the market size, but a certain segment of customers will probably feel that the higher price ensures a higher quality product, and some customers will actually view the high price as a sign that they are helping by donating to a social cause. Before raising the price, it might be good to do market research to test the reaction to a bar costing $4.09 (simply because it crosses the $4.00 mark. Provided TSL has a

strong brand community, they can use social media to tell the story of the price increase and solicit feedback to determine whether a price increase will be accepted.

Note: One point instructors can mention (or phrase as a question) is the potential for going over $3.99 and the psychological value of this threshold. Does it matter in this case? Another point that can serve as a follow up is to ask the students if they really react to a $.10 price increase on a product that costs $3.99. Likely they wouldn‘t care if the product did cross the threshold of $4. This highlights the importance of psychological aspects of pricing which will be covered in Chapter 10. A final point is that customers might be more receptive to the price increase IF they are informed about the reason for the increase AND TSL reminds them that the purchase has a social benefit and purpose.

4. TSL has a single supplier of Madagascar vanilla. What are the advantages and disadvantages of having a single supplier?

The advantages of having a single supplier of Madagascar vanilla include being certain that TSL‘s quality standards are being met. They also have the opportunity to establish a relationship with the supplier and perhaps gain preferential treatment—for example, first priority on filling orders or advance warning of fulfilment problems or upcoming price increases.

The disadvantages include finding themselves in a situation like the one described in this episode of the running case—the supplier is facing a crop shortage that could last for several years, resulting in a price hike, and the crop shortage combined with higher demand means that the supplier is unable to fulfil the most recent order. Other problems could include such things as a much larger customer who is able to pay higher prices is given priority by the supplier; political upheaval in the supplier‘s country; changes in regulations that make it more difficult for the supplier to ship goods. A single supplier could have a disaster such as a fire or flood, or an owner could die, which could all disrupt supply for short or longer term.

5. How has the social/cultural environment benefited TSL and how has the social/cultural environment contributed to the current problem with vanilla supply?

The social/cultural environment has benefited TSL in that its philanthropic mission is appealing to its target market. Beyond that, many customers want authentic, natural, organic ingredients, something that TSL is also committed to providing. The environment has contributed to TSL‘s current problem in that the demand for all-natural, high-end ingredients means that larger companies like Nestle feel the need to address that demand, and their bigger size means that they can provide incentives that TSL may not be able to match.

Note: A possible discussion extension question instructors might use here is to ask students if they think companies perform better if they have a social cause. Results are mixed, and it appears to benefit some companies more than others. An extension is to ask if students think in the near future it will be mandatory (demanded by customers) for all companies to have a social cause or ―give back‖ to be successful.

Application Exercise

1. Who will be the main direct competitor for TSL? What would you say are the main strengths and weaknesses of this competitor? How would you suggest TSL compete with this competitor?

Ryan Devlin often mentions Kind bar as an important competitor, and given its size and market share, this brand is probably the main competitor to TSL. Its strengths include its current market share, its reputation as being a healthy, gluten-free bar, its price point (around $2.00/bar--less if bought in bulk). Kind bars are featured in most grocery stores and in specialty outlets like Starbucks.

Kind has a philanthropic mission (The Kind Foundation, which focuses on education), but the appeal may not be as strong as the TSL mission of addressing child malnutrition through a BOGO initiative. Kind also focuses on being a healthy snack bar, and it is gluten-free (a current hot button food category), but it doesn‘t make the same claims about having the highest quality ingredients that TSL does. The FDA has challenged some of the wording on Kind bars‘ labels, and nutritionists say that not all of the flavours are equally healthy (those like cranberry and almond with protein and antioxidants are considered to be the healthiest).

The current message of TSL addresses its main strengths in comparison to those of Kind bar. TSL should continue to stress the high-quality ingredients and the very appealing philanthropic mission, along with the buy one/give one program.

2. What are the main legal regulations TSL must abide by to make and sell its bars in Canada? TSL wants a list of the main legal regulations it will need to consider; what do these regulations require TSL to do and not do?

The main regulations TSL should pay attention to are:  Consumer Packaging and Labelling Act, which prevents mislabelling ingredients and controls descriptive words like ―healthy‖ or ―fat-free.‖ It was under this act that the FDA in the US took exception to Kind bars labelling some of their flavours as ―healthy‖ (because of the amount of saturated fat in the flavours that feature nuts).  Canada Consumer Products Safety Act, which sets standards for safety. TSL will need to ensure that the raw ingredients meet those safety standards as well as the facilities where the bars are made. Note: This is a good spot to revisit the single supplier issue and discuss control.  Food and Drugs Act which governs the import and sale of food in Canada.

Chapter 4 Customer Behaviour General Model of Customer Experience Steps in the General Model of Customer Experience Some Additional Important Points About the Model LO 4.1 Define the stages in the general model of customer experience and describe the key concepts in each stage.

Influences on Customer Experience Individual Influences Social Influences Contextual Influences LO 4.2 List and describe the key individual, social, and contextual influences on customer experience.

Individual Consumer versus Business Buying End Consumers Versus Businesses as Customers B2B Implications for Marketing LO 4.3 Identify and describe the similarities and differences between individual consumer and business buying.

Chapter Introduction This chapter introduces students to customer thinking, behaviour and their purchase experience. The author video can help establish these constructs for students by looking at how customers and older selling approaches have changed to those employed today.

Ask the class about a recent purchase made online and how they arrived at their purchase decision. How did search and social media influence their decisions?

In LO 4.1 the chapter introduces the stages in the General Model of Customer Experience elements. LO 4.2 focuses on key individual, social, and contextual influences on customer experience and finally, the similarities and differences between individual consumer and business buying are examined in LO 4.3.

Industry Expert Video Jeremy Geutshe, CEO, Trend Hunter Please note: Video Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-choice Questions 1. Understanding customer behaviour is more important today than ever before because: a. competitors are doing more research about customer behaviour. b. customers have more power today than ever before c. customers are more selective about what they buy d. the rate of change is higher than ever before.

2. Whereas the average lifespan of a company was 75 years, today it is: a. 3 years b. 7 years c. 15 years

d. 20 years 3. Brands today, rather than marketing a specific product, are more likely to market: a. a lifestyle b. a product line c. a user-friendly website d. access to social media platforms 4. Customer research is likely to consist of: a. visiting several stores to compare brands and prices b. relying on customer reviews online c. doing comparative pricing online d. visiting the company website Discussion Questions 1. According to Geutche, what made Fortune magazine successful in spite of its launch in dismal economic times?

2. What elements make up the perceived value of a product?

3. To what segment did the GoPro camera appeal?

LO 4.1 Define the stages in the general model of customer experience and describe the key concepts in each stage.

Steps in the General Model of Customer Experience The general model of customer experience includes five steps and can be applied to any exchange, whether the exchange is complex, such as buying a computer, or simple, such as getting your morning coffee. Display Figure 4.3 and walk the class through the model using several examples of simple (coffee, candy bar, toothpaste) and more complex purchases (clothing, shoes, furniture). Ask the class to sketch out a recent simple and more complex purchase using the model structure. Ask them to compare the results for each description and then discuss. For example, students will likely report how their "Need Recognition" stage for a simple purchase like toothpaste was common—they were running low.

Ask the class what they do when a more complex purchase decision requires a search for more information. How do they acquire information - advertising, social media, word-ofmouth from family, friends?

How do they evaluate the purchase alternatives they available? How fixed is their attitude on simple purchases? How do they use heuristics to simplify their decision-making? Use these examples to then ask for a definition of "attitude" and "heuristics" Similarly, ask students to describe how they felt after making a major purchase in terms of satisfaction and then ask them to define terminology like cognitive dissonance and feedback.

Mini Case 4A: Question 1. What other ecommerce marketplaces do you visit regularly?

Answer 1. Student answers will vary. Examples of other ecommerce marketplaces include Shopify, WooCommerce, and Magento.

Question 2. When you visit an online ecommerce marketplace, what information do you review to decide which items or services to purchase?

Answer 2. Student answers may include: comparison of prices and quality (perceived value), product reviews and ratings, product description, brand reputations, return policy, delivery options (including speed of delivery), personal preferences and style, and personal recommendations.

Question 3. What makes a superior or inferior customer experience? Please give an example.

Answer 3. A superior customer experience is one that exceeds expectations. Customers feel important, listened to and respected, and customers are happy with the service. A superior customer experience may include a timely and empathetic response. This type of experience tends to build brand loyalty and positive word-of-mouth. An inferior customer experience is one that is below expectations. Customers become frustrated, annoyed and left with a feeling of non-importance.

Question 4. Beyond the steps outlined above, what other actions might you take either before or after a purchase, e.g., ask a friend for their opinion?

Answer 4. Student answers will vary, but may include researching prices of competing products, talking to friends, searching for product reviews, or researching brand reputations. After a purchase, you may also create your own online review.

Question 5. How can marketers enhance the customer experience?

Answer 5. Marketers can enhance the customer experience by ensuring accurate marketing, that is, customers get the product or service that was marketed. Marketers can also provide loyalty or bonus reward programs that create customer loyalty and encourage repeat customers. The customer experience can be enhanced when marketers seek feedback from customers and make improvements based on that feedback.

Question 6. What effect does the product price, i.e., expensive or cheap, have on your customer experience expectations?

Answer 6. Student answers may vary but typically, cheap products can be perceived to be of low quality and are associated with low expectations for customer service. As products become more expensive, customers tend to expect better quality and better customer service.

Some Additional Important Points about the Model First, while the model applies to both complex and simple exchanges, in the case of routine purchases some of the steps might be internalized and not noticed by the customer, e.g., routine coffee purchase decision.

Second, while the steps in the process generally unfold as described, there are times when some of the steps might be completed out of order or when the process might involve back-tracking between steps, e.g., revisiting steps in the online purchase process for airline tickets.

Third, the duration of the experience can vary significantly, e.g., coffee only lasts an hour, a vacation might last a week.

Finally, no two experiences are the same, since the customer experience is a function of customer perception, e.g., each visit to the same restaurant might be a different experience.

Ask students to illustrate each of these points with a personal example.

Author Podcast 4.1 Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Jasmine Bina says that customers as a group have changed in recent times; today they are: a. more price savvy b. more selective c. younger d. more fragmented into subgroups 2. Jasmine says that customers have more power today than ever before because: a. they have more discretionary income b. they shop more frequently than their parents did c. they have more ways to get information, both positive and negative, about companies and products. d. they do more online shopping.

3. Post-purchase behaviour is more important now than ever before because: a. there are more options in each product category. b. it is easier to return items than it once was. c. once the purchase is made, the purchaser becomes a customer of the brand. d. the purchaser is more likely to purchase a product a second time.

4. Getting the second purchase is: a. much easier than getting the first purchase. b. much more difficult than getting the first purchase. c. a signal that the purchaser is now a loyal customer. d. often occurs when a price drop is announced.

Discussion questions 1. What has been the impact of online reviews?

2. Why, according to Jasmine, is post-purchase behaviour so important to the success of a brand?

3. Why are referrals so important to the success of a product/brand?

Mini Case 4B

Question 1. Mitchell chose the Business Plus fare. Which one would you have chosen and why, given the information provided?

Answer 1. Answers will vary by student. It will depend on the experience they want, how they perceive value, and if the advantages outweigh the costs.

Question 2. Do you think he was satisfied with his purchase/experience?

Answer 2. He was satisfied, but not delighted. He may opt to purchase a more inexpensive option in the future. The benefits may not have outweighed the costs for Mitchell.

Question 3. What do you think Ryanair could do differently to make sure he was satisfied in this case?

Answer 3. The seat size seems to be the biggest issue. They could also offer free soft drinks, water, and small snacks.

Question 4. What would you expect Mitchell to do as part of his post-purchase evaluation?

Answer 4. Mitchell will likely spend some time thinking about his level of satisfaction and future decision. He will most likely speak to others about his experience. He is unlikely to provide the airline feedback unless he asked to complete a digital survey.

Question 5. Does it make sense for a discount airline like Ryanair to even have a business class option for its flights? Why or why not? And if so, who would be interested in purchasing this option?

Answer 5. It does make sense to offer business class. It is a way to boost profit without the need to provide extra service. Some customers want the guarantee of seats and storing their bags with them and are willing to pay for it. Customers who value experience would be interested in this option as well as individuals who travel regularly for work.

Discuss the ‗Applied Metrics‘ feature included in the chapter: One of the most important aspects of service businesses is to deliver good customer service and many companies track complaints as a way to keep track of their performance. One of the common measures for complaints is the complaint rate. The complaint rate is calculated as a percentage of the number of complaints received in a given period divided by the number of customers served, so: Complaint Rate (%) = (Number of complaints/Number of Customers)

Most companies want to keep the complaint rate below 1%. Suppose a hotel had 500 guests for the previous week and had 4 complaints. This compliant rate would be calculated as .8% and would be considered acceptable.

Number of complaints Number of customers Complaint Rate ?

4 500 0.80%

4.1 Concept Check Question 1: List and describe the five steps in the customer experience model. For each step, indicate one key marketing point.

Answer 1:  Need Recognition: in which the customer identifies an external or internal need to be filled by a product or service  Information Search: in which the customer recognizes the need in Step 1 and seeks out information about available options to fill that need  Evaluation of Alternatives: in which the customer identifies other options (i.e., brands) and assess the perceived value of each  Purchase/Choice: occurs once the customer has evaluated options and makes a choice/completes an exchange  Post Purchase Evaluation and Behaviour: the customer uses the product or service and determines if there is satisfaction or dissatisfaction present due to the exchange Question 2: What is meant by the term heuristics, and what role does it play in customer decision making?

Answer 2: Heuristics is another term for ―rules of thumb‖ that can be put into effect that can save a consumer time and effort in making complex decisions. This generally comes into play in the Evaluation of Alternatives step of the customer experience model when a difficult or complex decision is to be made. This generally results in making a good decision, as opposed to focusing on making the best decision.

Question 3: Think about a recent purchase you made for something above $100. Recount your experience listing what happened in each step of the experience.

Answer 3: Answers will vary based on students, but thorough answers will include identification of each of the five steps in the customer experience model and a brief description that indicates the student‘s understanding of that step. Example:  Purchase: Laptop  Need Recognition: I needed a computer that I could travel with.  Information Search: I looked through laptop reviews on CNET.com and user reviews and suggestions on Reddit to help decide what I needed in a laptop and

  

what options were out there.

Evaluation of Alternatives: I considered a tablet with mobile keyboard, as well as a few different brands of laptops, including Dell, Acer, Mac, HP, and Asus.

Purchase/Choice: I bought an ASUS laptop for $379.00 at Best Buy. Post Purchase Evaluation and Behaviour: I‘m happy with my purchase, but a week after purchasing, I found the same laptop available on another website for $329.00 and my satisfaction level with the purchase would be higher if I‘d spent less.

Influences on Customer Experience

LO 4.2 List and describe the key individual, social, and contextual influences on customer experience.

Display Figure 4.9. Define each of the three categories of influence on the customer experience and ask the class for illustrative examples.

Individual Influences

Individual influences are characteristics unique to each individual and include demographic traits, personality, and perceptual differences. Common demographic traits that have a direct influence on the customer experience include age, gender, family life cycle, income, and race.

Personality is the individual character evidenced by a person‘s thoughts, feelings, and behaviour. The most obvious way personality influences purchasing is through customers‘ self-image. A self-image is the person you want others to see.

Perception is biased. Not wrong, but perception is unique. Three perception processes make your experience unique. Selective attention means you choose what information you pay attention to and what you ignore. Selective interpretation means you interpret information in the way that matches your beliefs. A third perceptual process that influences the experience is selective retention. In most cases, we only remember what we want to, which means things that you remember have importance to you. Taken together, these processes mean perception is biased in that customers see what they want, interpret it based on their beliefs, and have selective memory.

Display the Self Quiz to the class and ask the class to present their results. Discuss the results and ask the class to explain the range of answers people provided?

Review the ‗Ethical Dilemma – You Decide‘ feature included in the chapter. The scenario is as follows: You are about to finish college and have decided it might be time to get a different car since your current car is beginning to have problems. A friend recommends a car dealer in town that has inexpensive used cars that are in great shape and also provide financing. You go to the dealer and look at several cars.

After browsing the lot and taking several cars for a test drive, you decide you are interested in a 4 year old car that seems to be in good condition and drives well. The price of the car is $15,000 and the salesperson sends in the finance manager who will take care of the financing. You ask the manager how much the monthly payment will be if you borrow the $15,000 and pay it back in 4 years. The finance manager asks how much you make in yearly income to determine your payment. ―Why does that matter?‖ you ask. ―I am borrowing $15,000 and I know it will be enough to make the payment.‖ The manager replies, ―Well, different income levels have different credit risk for us, so your rate will be based on how much you make per year.‖ The manager shows you a screen with the following information on it listing income levels and monthly rates and payments. You look through the information and ask, ―So the more I make, the less I pay, and the less someone makes, the more they pay? I will be making a little over $50,000 if I take one of the job offers I have, but if I take the job with the charity I was considering I will only make about $30,000, and maybe a little less.‖ The manager comments, ―Well if you take the job at the charity, you will have a much higher monthly payment.‖ You tell the manager you will be back in contact soon, but think to yourself, why does it make sense that the same $15,000 loan will be more expensive when you make even less money to pay the loan back with. Doesn‘t it seem logical that if the loan costs more for someone who makes less money that it just increases the possibility that you might run into trouble paying it back? Is this ethical from the bank‘s perspective? Do customers who purchase similar products expect to pay different amounts for the same product or service?

Monthly Car Payment for Different Buyers for $15,000 Borrowed for 48 months

Yearly Income $100,000 $50,000 - $99,999 $30,000 - $49,999 Under $30,000

Risk Category Very Low Low Medium High

Interest Amount borrowed rate Monthly Payment $15,000 5.00% $346 $15,000 7.00% $360 $15,000 9.50% $377 $15,000 12.00% $396

Social Influences Social influences are other people who are important to an exchange. Reference groups serve as a standard against which you measure yourself. Aspirant groups influence our behaviour without any formal relationship because we value their opinions about certain purchase categories. An opinion leader influences others when they purchase in the category. Members of a particular social class group have similar hobbies, education, income levels, and often share similar views of the world and events. Your culture consists of the values and beliefs you share with others in your general population, and these values and beliefs can have a big impact on your purchasing. Subcultures are smaller groups within a culture that share common interests and beliefs.

Define and discuss the social influences and ask the class for examples of each in a particular situation. Then ask them why they think that particular social group influences customer behaviour. For example, a bride to be who is planning her wedding party might be influenced by a reference group made up of her recently married friends. She may trust their advice because she believes they know more about the decision.

Contextual Influences Contextual influences are situational. The most basic decision context would be routine decisions, which are repeated and require no or very limited effort on the customer‘s part.

At the other extreme a customer uses extensive problem solving when facing a purchase decision that is perceived to be important and perhaps higher risk than most purchase decisions. Limited problem-solving means that the customer will engage in some conscious external information search and evaluation but will likely use heuristics because the decision is not important enough to use extensive problem solving.

The importance of the purchase is often related to the customer‘s motivation. Motivation is the drive that prompts you to act a certain way. A consumer can be motivated by very basic needs or by higher level needs. Present Maslow’s Hierarchy of Needs in Figure 4.10 and explain each level.

Define and discuss the contextual influences and ask the class for examples of each in a particular situation. For example, a routine decision for someone running low on gasoline while driving on a highway would be to pull into the next available service plaza. In each case, ask students how marketers can use an understanding of the contextual influence to guide the customer's decision-making.

Define "expertise," "environment," and "time" in terms of their influence on the customer experience. Ask the class for examples of each.

4.2 Concept Check Question 1: What the key individual influences of customer experience?

Answer 1: Individual influences of customer experience include characteristics or demographic traits specific to the individual (consumer). These can include age, gender, family life cycle (single, married, divorced, etc.), income, and race.

Question 2: What are the key social influences on customer experience?

Answer 2: Social influences refers to other individuals who may be part of a purchase, including roommates, partners, spouses, or family members.

Question 3: What are the key contextual influences on customer experience?

Answer 3: Contextual influences on customer experiences are specific to the situation.

These can include things like the context of the decision to be made, the timing of the decision, the customer‘s motivation or expertise in a particular area, and the physical environment. These are broken down into routine decisions (basic decision making), extensive problem solving (a decision that is important and perceived as higher risk), and limited problem solving (some evaluation will be utilized, but heuristics will likely be relied upon to make a final decision).

Individual Consumer versus Business Buying LO 4.3 Identify and describe the similarities and differences between individual consumer and business buying.

Display Figure 4.12, ―Expanded Model of Customer Experience,‖ to the class and highlight the similarities and differences of the 5-step customer experience for a purchase by an individual, a family and a business. Ask the class to provide example of a purchase when the steps might be similar for all three and another purchase where it would be quite different. Ask them to explain why they think the behaviours would be that way.

Display Figure 4.13, ―Business Buying,‖ and explain the six buying centre roles.

The group that makes a purchase decision for a business is referred to as the buying centre. The initiator is the person in the buying centre that recognizes the need and starts the buying process. The buyer/purchaser buys and pays for the purchase. The decider is the person who has the final decision-making authority. Influencers are members of the buying centre who have expertise or some other tie to the decision and provide advice to other members of the buying centre. The user is the person who will use the product once it is purchased. The gatekeeper is in some ways the most important person in the buying centre at the beginning of the process, as the gatekeeper either allows or denies access to the rest of the buying centre.

Display Figure 4.14, ―Comparison of Different Customer Buying Contexts,‖ and discuss the similarities and differences between the individual, family, and business context.

Author Podcast 4.3a Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Jasmine Bina says that the total sensory experience of a store like Topshop is designed to: a. distract customers from focusing on the higher prices they charge b. make customers feel welcome in the store. c. keep customers in the store longer. d. allow the store to employ fewer salespeople.

2. Trader Joe‘s goal with its store brand—TJs—is to: a. provide high-quality, low-risk opportunities to discover new foods b. offer lower cost alternatives to national brands c. allow the stores to have a higher profit margin than selling national brands d. increase their brand recognition 3. The experience of shopping in a store like Topshop or Trader Joe‘s is like:

a. going to a festival b. being on a treasure hunt c. shopping in a mom-and-pop shop d. shopping in a different country 4. Changing up where certain products are found in a store has the effect of: a. confusing customers who shop in a particular store regularly b. improving traffic patterns within a store. c. providing opportunities for customers to see new products and add them to the shopping cart. d. allowing rotation of different brands of the same product.

Discussion Questions 1. If you have shopped at a Topshop, Zara‘s, or other fast fashion store, describe the experience. How was it different from shopping at Macy‘s or Nordstrom‘s?

2. Describe how a store like Topshop is a total sensory experience. Why is this approach successful?

3. Under what circumstances might shopping as a treasure hunt be unappealing? What other approaches might retailers take?

Author Podcast 4.3b Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. The main job of a marketer selling to a business is to: a. sell a good product. b. sell the product in quantity. c. make the purchasing company more efficient in some way. d. ensure that the company will come back for a second purchase.

2. Members of the buying centre have somewhat different goals, including: a. increasing inventory b. increasing topline revenue c. decreasing the number of purchases per year d. finding the best product 3. Business buying is analogous to family buying in that: a. the goal in both cases is for the marketer/retailer to get the biggest sale possible b. like the people in the buying centre, family members may have different goals in making a purchase c. both are looking for the best product at the best price. d. because there are several people involved in both cases, the process is slow and time consuming.

4. The main difference between business buying and individual buying is: a. in business buying, there are several people involved, all with different goals. b. individuals usually know what they are looking to buy. c. the goal of business buying is always to improve profit margin d. business buyers have relatively bigger budgets.

Discussion Questions 1. What are some factors that marketers need to take into account when they are managing sales to a business?

2. How might the goals of the end user and the buyer differ?

3. Would marketing to a business be easier or harder than marketing/selling to an individual? Why? 4.3 Concept Check Question 1: What factors make business buyers different from individual customers?

Answer 1: Major differences between business buyers and individual buyers include the number of people involved in making the decision to buy (individual versus a group of people); the evaluation of alternatives being more complex—each member of the buying centre may be looking for something different in a purchase and therefore, the choices may differ—and yet another difference is that business buying usually has rules or guidelines/regulations around their buying whereas individuals do not typically have to follow specific rules or guidelines when buying.

Question 2: Describe the different roles in a buying centre.

Answer 2: The buying centre is made of deciders, influencers, purchasers, and gatekeepers. Deciders have the final say in the decision making. Influencers are members of the buying centre who may have expertise or some other tie to the decision that is to be made. Purchasers buy and pay for whatever is purchased. Gatekeepers allows or denies access to the rest of the buying centre.

Application Questions Question 1: Use a personal example of a recent purchase to list the steps in the general model of customer experience.

Answer 1: Answers will vary based on students, but thorough answers will include identification of each of the five steps in the customer experience model and a brief description that indicates the student‘s understanding of that step. Example:  Purchase: Laptop

    

Need Recognition: I needed a computer that I could travel with.

Information Search: I looked through laptop reviews on CNET.com and user reviews and suggestions on Reddit to help decide what I needed in a laptop and what options were out there.

Evaluation of Alternatives: I considered a tablet with mobile keyboard, as well as a few different brands of laptops, including Dell, Acer, Mac, HP, and Asus.

Purchase/Choice: I bought an ASUS laptop for $379.00 at Best Buy. Post Purchase Evaluation and Behaviour: I‘m happy with my purchase, but a week after purchasing, I found the same laptop available on another website for $329.00 and my satisfaction level with the purchase would be higher if I‘d spent less.

Question 2: The text suggested that the concept of the model of customer experience could be applied to any exchange. How would you use it to describe your education experience?

Answer 2: Answers will vary based on students, but thorough answers will include identification of the five steps in the customer model and a brief discussion related to their education. Example:   

 

Need Recognition: I wanted to get my Bachelor‘s Degree in Marketing.

Information Search: I looked into schools with interesting business and marketing programs that were in areas that I liked (Ontario and Western Canada) Evaluation of Alternatives: I narrowed my choices down to a list of about 10 schools that I liked and went through the acceptance criteria and other details about each school to determine which schools I definitely wanted to apply to and which schools I did not want to apply to.

Purchase/Choice: I decided to apply UBC, University of Toronto, and Queen‘s.

Post Purchase Evaluation and Behaviour: I was accepted to the University of Toronto and Queen‘s and decided to go to Queen‘s. At the end of my senior year, I am very satisfied with my choice.

Question 3: What role does experience play in information search?

Answer 3: A customer will often search their memory at the beginning of an information search to determine if they have applicable experience to the decision to which they seek to make. A customer with experience in a particular area may move more quickly through an information search as they can narrow their criteria more quickly. Customers with a lot of experience in a particular area will rely heavily on information they have in their memory to make a decision rather than seek external resources to provide that information.

Question 4: What is an opinion leader? Provide two personal examples of opinion leaders

you think influence your shopping behaviour.

Answer 4: An opinion leader is part of an aspirant group and is someone who we may not formally know, but nevertheless value their opinion and influence due to reputation.

Examples include athletes—especially when purchasing sports equipment; famous chefs or cooks when purchasing kitchen equipment or recipes; beauty or fashion social media influencers when purchasing makeup or clothing; etc.

Question 5: Describe a specific example when you used heuristics to make a purchase decision. Why did you decide to use that specific heuristic? Were you satisfied with the outcome in the end?

Answer 5: Answers will vary based on student experiences, but an example may be when an individual was at an airport bookstore and wanted to buy a book. Because of limited time and choices available, you may purchase a book whose author you are familiar with and like. Satisfaction of a decision based on heuristics of course will vary.

Question 6: Describe in your own words the concept of cognitive dissonance and provide an example from your own purchasing. What was the end result and how was it resolved?

Answer 6: Cognitive dissonance is the feeling that results after making a choice wherein an individual continues to wonder if they made a good choice or seeks validation of the choice they made. Examples will vary between students, but an example could be after a drastic haircut, an individual questions whether or not the choice to make a drastic change was a good choice and seeks validation of that choice.

Question 7: List three important individual influences on the customer experience and provide an example of each in your own purchasing.

Answer 7: Answers will vary based on students‘ experiences. Examples for purchasing a car may include:   

Family life cycle: a single person without plans for marriage or children may focus on smaller 2-door sedans Age: a 25-year-old may not be interested in purchasing a car often associated with older people, such as a Lincoln Town Car Income: a person who makes $30K a year is unlikely to be able to purchase an expensive luxury car

Question 8: List three important social influences on the customer experience and provide an example of each in your own purchasing.

Answer 8: Answers will vary based on students‘ experiences. Examples for purchasing

furniture may include:   

Family/children: if an individual has small children, they may not want to purchase, for example, a white couch Referent groups: considering the furniture that a friend has in their home Aspirant groups: considering what type of a furniture a stylish celebrity designer has in their home

Question 9: List three important contextual influences on the customer experience and provide an example of each in your own purchasing.

Answer 9: Answers will vary based on students‘ experiences. Examples for purchasing a pet may include:   

Time: how much time an individual has to spend caring for a pet Expertise: whether or not an individual has ever cared for a pet or knows how to care for a pet Physical environment: if an individual has a home with a yard, a fence, or is close to a place that a dog can be walked in; or if a person lives in a high rise condominium; if a person lives in a rental that prohibits certain pets, etc.

Question 10: If you were going to get a pet, what influences would affect your decision?

If you already have a pet, what influences affected your decision to get one?

Answer 10: Depending on your circumstances, getting a pet should involve all three types of influences (individual, social, contextual) or maybe just individual and contextual. If a person lives in a home with other people, they will certainly need to consider both individual and social influences (perhaps one family member is allergic to cats), as well as contextual—if you want a pet but spend long hours away from the home or live on the 25th floor of a high rise building, you may not want to get a puppy who would require lots of attention and plenty of access to the outdoors for housebreaking. If an individual lives alone, they may not need to take into account social influences necessarily. It could be argued that getting a pet is a major decision and all influences should be considered in any case.

Question 11: Describe and provide an example for the differences between the three decision contexts. Which is the most common? Least common?

Answer 11: Contextual influences are broken down into routine decisions (basic decision making, such as buying a cup of coffee), extensive problem solving (a decision that is important and perceived as higher risk, such as buying a car), and limited problem solving (some evaluation will be utilized, but heuristics will likely be relied upon to make

a final decision, such as selecting a restaurant for dinner). Limited problem solving is the most common and extensive problem solving is the least common.

Question 12: Choose a B2B product or service and imagine you are tasked with marketing it to a potential client. Describe the various roles within the client‘s buying centre and outline a marketing strategy that effectively addresses the needs and concerns of each role.

Answer 12: Student answers will vary but the answer should include a description of the six roles in a buying centre. A buying centre is the group of people in a business who are tasked with the purchase of a certain product or service. The buying centre is made of initiators, buyers/purchasers, deciders, influencers, and gatekeepers. Initiators recognize the need and start the buying process. Deciders have the final say in the decision making.

Influencers are members of the buying centre who may have expertise or some other tie to the decision that is to be made. Purchasers buy and pay for whatever is purchased.

Gatekeepers allow or deny access to the rest of the buying centre.

Discussion Questions Question 1: Are online reviews trustworthy? Why or why not?

Answer 1: Responses will vary, and students‘ point of views will largely depend on experience. Those who say they are trustworthy may argue that there are certain factors that can be evaluated to determine legitimacy of the review: number of reviews, ratio of good to bad reviews, personal knowledge of good/bad reviews/reviewers (i.e., if a friend or family member likes a product and gives reasons for a positive evaluation of a product that align with positive reviews), different websites that may have more trustworthy reviews than others. Those that say reviews are not trustworthy may point to evidence that some producers buy positive reviews or pay to have negative reviews removed.

Some may also suggest that a dissatisfied customer may provide a negative review even if the product itself is not bad (e.g., Yelp restaurant reviews made by people who have not been to a restaurant but leave a negative review due to differing ideas and politics with restaurant owners).

Question 2: Why is perceived value so important for marketers? Is it possible for a person to buy something that has a negative perceived value? Explain.

Answer 2: Responses will vary. Students should indicate that perceived value is important for marketers to understand because customers usually will buy something that has the highest relative perceived value. This consideration comes into play in the evaluation of alternatives step of the buying model—in most cases, whichever choice has the highest perceived value will win (the product will be purchased). It is unlikely that in any context, a person will intentionally purchase something that has a negative value,

based upon their perception. Perceived value fluctuates and is informed by the context of the situation.

Question 3: How reliable do you think satisfaction surveys are for companies trying to make sure their customers are happy? Do you fill out satisfaction surveys?

Answer 3: Responses will vary, and students‘ point of views will largely depend on experience. Satisfaction surveys are often voluntary, meaning that a large percentage of individuals who have the option of completing a survey may ignore it altogether, which eliminates an entire set of customer feedback and experience in regard to satisfaction. Of the remaining surveys that are completed, customers may have a wide range of motivation behind completing a survey—it is often thought that reviews (surveys) are completed only when customers are very pleased or very displeased with something, which can also skew the reliability.

Question 4: How is it possible for two people to have different experiences when they see the same thing?

Answer 4: Responses will vary, and students‘ point of views will largely depend on experience. Every individual will have a different perception of experiences, even if that experience appears to be identical. Each may draw on different previous experiences to inform their response and perception of another experience or event, and the totality of an individual‘s personal experiences and perceptions will continue to evolve and inform throughout one‘s life.

Question 5: Can brands have a personality? Explain.

Answer 5: Responses will vary, and students‘ point of views will largely depend on experience. Brands can have personalities, and marketing professionals often craft these personalities and utilize them to influence exchanges. A company such as Ben & Jerry‘s strives to assert its personality as quirky (with unique flavour combinations and names), interested in the environment and sustainability (buying supplies from organic farmers, involving themselves in recycling efforts, etc.), and politically liberal (based on social activism and philanthropic efforts). A company like Wendy‘s attempts to drive home a personality that exudes family values, politeness, and friendliness. Class discussion can be around whether or not a strong personality is essential to a brand, or if it can harm a company.

Question 6: The term ―keeping up with the Joneses‖ has been used for many years to describe social influences on purchasing. Do you think social purchasing influences are negative? Would you be better off ignoring the social influences and paying more attention to your individual purchasing influences instead? Explain.

Answer 6: Responses will vary, and students‘ point of views will largely depend on

experience. Social influences can be negative if an individual prioritizes social influences over individual influences or even contextual influences. However, there may be some cases wherein placing value on social influences may be beneficial for a buyer. For example, in the case of a large and important purchase (a home), consideration of what other members in the family, especially those who will be living in the home and directly affected by the purchase, think is important. It is important to remember that social influences include children, partners, parents, etc., and therefore certain purchases may involve the input of more than just the individual buyer.

Question 7: What is the idea behind Maslow‘s hierarchy of needs? Is it useful for marketers? Explain.

Answer 7: Responses will vary, and students‘ point of views will largely depend on experience. Responses should point out that Maslow‘s hierarchy of needs can inform very basic needs in an individual (physiological needs: food, water, sleep, sex) or more ―advanced‖ needs like self-actualization (highest level). Marketers can consider the hierarchy in terms of determining the motivation of a buyer for a purchasing decision. By identifying motivation (physiological, safety, love belonging, esteem, self-actualization), marketers can tailor their communications in the exchange accordingly.

Question 8: Analyze the impact of digital transformation on marketing practices in both B2B and B2C contexts. How have technological advancements changed the way businesses and individual customers make purchasing decisions, and what strategies can marketers use to adapt to these changes and stay ahead of the competition?

Answer 8: Digital transformation has changed marketing in both B2B and B2C contexts.

Technological advances mean that both businesses and individuals have increased access to information and increased ability to customer or personalize their purchases.

Businesses and individuals also now interact across different marketing channels both online and offline and have an opportunity to engage with brands through various touchpoints. Marketers can use digital transformation to understand the customer needs and embrace the ability to personalize both the customer journey and the end product or service.

Question 9: Consider a company that markets both B2B and B2C products or services.

Evaluate the challenges and opportunities that the company faces in addressing the unique needs and preferences of each market segment. How can the company balance its marketing efforts to effectively target both types of customers?

Answer 9: Key differences for B2B marketing that marketers have to consider are that businesses include the buying centre rather than the individual purchaser. Businesses have a more complex buying process, typically with task-focused rules. Businesses take longer to market to, which has the potential for building relationships. Marketers deal with business customers directly and have the opportunity to make larger sales per transaction but face higher risk as well. B2B marketing differs across the different

marketing decisions. Compared with consumers, business buyers are more specific in their product choices, are less price sensitive and more likely to negotiate prices, rely more on personal selling, and sometimes have very literal connections with their B2B partners.

Running Case This Saves Lives (TSL) Video Please note: Video Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-Choice Questions 1. The marketing team at TSL identified as a characteristic of their target customer someone who is: a. health-focused b. vegetarian c. single d. more artsy 2. The first retail outlets TSL pursued were: a. major national chain grocery stores b. chains like Target c. major airports d. independent coffee houses 3. Part of the philosophy of the company that became part of their marketing story is that: a. philanthropy is available to everyone b. small actions can lead to big change c. helping children is positive d. it is important to eat healthy snacks 4. As they gathered more market data, the marketing team adapted their marketing story to say: a. We‘ve helped thousands of children get nutritious meals b. This is an inexpensive way to do good. c. Buy a great-tasting bar and help a child. d. We are the most nutritious bar in the energy bar market.

Discussion Questions 1. What are the characteristics of the target customer TSL identified? Are there possible pitfalls with their profile?

2. Can you suggest a different strategy for finding the best possible outlets for their bars?

What are some of the difficulties of their approach?

3. Discuss their evolving marketing story that focuses on the quality of the product first, then the social mission. Was this a good strategy? Why or why not?

Running Case This Saves Lives (TSL) Questions Answers may include the following.

1. How is the buying behaviour of the two customers similar, and how is it different?

Similarities: Neither customer is loyal to a particular brand, and both shop around. They also both seem to think that the flavour of most bars is not particularly great.

Differences: Customer #1 looks for better flavour; Customer #2 makes choices based first on price, then on flavours (ones that both she and her son enjoy). Customer #1 is less price sensitive than #2, so he may be more open to the higher price of TSL bars provided he likes the flavour. If he likes the flavour he might be more inclined to buy them regularly since he has not found a bar that ―wows‖ him yet. He may consume more snack bars in a week than Customer #2, who seems to regard them as more of a treat.

2. From a marketing perspective, how could TSL use the information gained from talking to the two customers?

Because both customers mentioned the importance of flavour, the TSL team might consider doing some live taste tests of their bars versus Kind bars and perhaps Clif bars.

Assuming testers prefer the flavours of TSL bars, the team could use those results in their marketing. TSL could also use this opportunity to get feedback on new flavours if they wanted to. Ideally, they could also gain information about naming bars to suggest better taste. Are there specific words that suggest superior flavour?

Since price seems to be an important consideration for at least some customers, they might use the taste tests as opportunities to ask about price—What is the maximum a customer is willing to pay for a great-tasting bar? Does the BOGO mission influence customers‘ perception of price? If so, how? Can different prices be charged for bars with different ingredients? For example, what are the expectations about the price of a nut and fruit bar containing peanuts and raisins? Almonds and Madagascar vanilla?

3. Could TSL treat both customers the same, or do they need to have a different marketing strategy for each? Explain.

Any marketing strategy should include the core values of TSL bars: premium ingredients, great taste, and the BOGO mission. Chloe learned that Customers 1 and 2 shared an enjoyment of snack bars, both bought them fairly regularly, and flavour was important to both. However, these two customers are different segments because they want different things. The main difference between these two customers is their level of price sensitivity, but it probably makes sense to address the price issue in a somewhat subtle way, focusing on the high-end ingredient and the great flavour. If Customer 2 and her son really like the flavour of TSL bars better than other bars, they may be willing to pay the higher price, but only occasionally if/when the bars are on sale as a special treat.

Customer 1 might be inclined to buy TSL bars as a regular purchase IF he likes the way they taste better than most bars he has tried. It is a good idea to bring up the point that companies sometimes make a mistake trying to be everything to everyone rather than

something very specific to a specific group. (No positioning loses, whereas a company can still be quite profitable even serving a small target market if they do it well).

4. Which of these customers do you think is more likely to purchase a TSL bar? Which is least likely to do so? What makes you think so?

Customer #1 is more likely to purchase a TSL bar because his number one criterion is flavour, and he is less price sensitive than Customer #2. Customer #2 might occasionally buy them, but only as a special treat and likely only if they are on sale.

5. From what you have learned in this chapter, which influences on buyer behaviour can you identify as most critical in influencing each customer to make a purchase?

Personal preferences are very important in driving purchase decisions for things like food, but other influences could be more important for other types of purchases—for example, peer influences or cultural influences are likely to be more important for things like clothing or cars. In the TSL case, personal preference (in this case, flavour) is more important to Customer #1, while price is more important to Customer #2, perhaps because snack bars are more of a treat for her and her son, and she may have to be more budget conscious than Customer #1. Customer#2 also has her son to consider, so is influenced by his preferences as well. Note that neither customers seem particularly concerned about the social mission. Is this something TSL could influence through their marketing?

6. Chloe talked to customers after they had already put bars in the cart. Should she have talked to customers who had bought other snacks? Why or why not?

Since the TSL team is in the early stages of gathering market data, Chloe‘s decision to limit her research to customers who bought bars makes sense. For now, the team needs to understand the specific buying patterns of customers who buy bars. Their initial assumption is that customers compare bars and make a decision within the bar category.

However, a next step in their intelligence gathering might be to learn what influences the decision to buy other snacks to get a better idea about what other snacks customers consider instead of bars and how they could influence customers generally looking for snacks to purchase TSL bars instead of other snacks.

Chapter 5 The Role of Research in Marketing The Research Plan and Process Decision Support Systems Market Research Versus Marketing Research The Research Process LO 5.1 List and describe the six steps in the market research process, and explain why research is important to marketing managers.

Research Design Market Research Goals Types of Market Research LO 5.2 List and describe the different primary research objectives and research types in marketing.

Research Implementation Data Sources Data Collection and Analysis Methods Summarizing Research Findings LO 5.3 List and describe the common options for data collection and analysis and the relationships between the two.

Practical Considerations for Conducting Marketing Research LO 5.4 Identify and describe the practical considerations when conducting research in marketing.

Chapter Introduction This chapter a presents a brief overview of the most common research methods and issues. Students will be shown how research is used to answer marketing questions and make marketing decisions. Ask the class to list some of the questions they would like answered by marketing research. This discussion should help frame an understanding about research and the contribution made to better marketing.

In LO 5.1 the six steps in the marketing research process are examined in detail. LO 5.2 focuses on different primary research objectives and types of research while LO 5.3 looks at data collection and analysis. Finally, some practical considerations when conducting research are examined in LO 5.4.

Industry Expert Video Clay Potter, Master Brewer, Moon Under Water Brewery and Pub Please note: Video Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-choice Questions 1. Market research is important to: a. connect with customers b. make the perfect product c. save money before product launch d. make successful marketing decisions

2. What has market research helped Moon Under Water Brewery and Pub with? a. launching the best product possible b. finding the best ingredients c. building up the community d. studying competitive products 3. What does Moon Under Water Brewery and Pub do to conduct market research on a small budget? a. have students conduct research for free b. make a small batch to get feedback c. launch without a market research study d. conduct research with their employees only 4. What advice did Clay Potter give to entrepreneurs? a. obtain as much funding as possible b. hire a team of employees quickly c. launch as many ideas as possible d. start small Discussion Questions 1. How does Moon Under Water Brewery and Pub use marketing research?

2. What are the challenges of market research for Moon Under Water Brewery and Pub? 3. What market research advice did Clay Potter have for entrepreneurs?

The Research Plan and Process LO 5.1 List and describe the six steps in the market research process and explain why research is important to marketing managers.

Decision Support System Begin with a discussion about the importance of having good information to guide decision-making and the impact of having poor information. Display Table 5.1, ―Sample Product Failures‖ and discuss how these product failures could have happened. What did management miss?

This discussion opens the way to the need for a decision support system—a systematic approach to collecting information to help managers make decisions. Typically, these systems are computerized, and the analysis of the information collected is also largely done by computers. Companies collect customer information via sales reports, purchase records, and other sources to create a customer database. The database is then used to determine purchase patterns and profile different types of customers.

Effective decision support systems have three characteristics. First, the information must be collected systematically. Second, the information collected must be relevant to specific managerial decisions, so the information must have a purpose and be useful for making a specific decision. Finally, the system should be flexible. Ask the class for illustrative examples of each of these characteristics.

Market Research versus Marketing Research

These two terms are often unclear to students. Distinguish between them by using examples to illustrate each term.

Market research is a general term that covers external research investigating one of the three components of the market—customers, competitors, or the company. Examples of market research would include customer preferences for specific brands, competitive analysis, and company image research.

Marketing research, in contrast to market research, is research focused on assessing the effectiveness of a specific marketing tool or tactic. A manager might use market research to determine if local customers are familiar with Boston Pizza, while marketing research would be used to determine if local residents heard the local radio ad announcing the location opening and how many intended to try the new Boston Pizza. Ask students for more specific examples.

The Research Process The six steps in the marketing research process should be introduced as a unit and explained individually. Then each step should be examined and illustrated in more detail.

1. Define the problem/opportunity 2. Develop a research plan 3. Collect data 4. Analyze the data 5. Prepare and present findings 6. Outline follow-up and create an action plan 1. Define the problem/opportunity Display Table 5.2 ―Sample Product Failures with Research Suggestions.‖ Ask the class how marketing research and a better problem definition could have avoided or perhaps changed the failure. Ask the class for specific statements that would have defined the research problem or opportunity for one failure on the list.

2. Develop a research plan The second step in the research process is to develop the research plan. The key decisions will include: (1) the primary objective(s) of the research, (2) the type of research that will be conducted, (3) the information needed and how it will be collected, (4) how the data will be analyzed, and (5) the desired outcomes of the research. Ask the class to sketch out a general description of the research plan they would have recommended for the failure

chosen earlier.

3. Collect data The type of data needed and how it is collected will largely depend on the goal and type of research being conducted. Ask the class what sort of data they would need to continue the research example they are developing. How difficult would it be to secure the types of data they need? For example, is the data easily available online at government web sites or would a unique survey of consumer attitudes need to be created and executed?

4. Analyze the data Different data require different analysis, and specialized, trained researchers should be used to analyze data to get the full benefit of the research. Students should be directed to courses available that specialize in this field such as statistics.

Review the ‗Applied Metrics‘ feature included in the chapter: A primary use for marketing research is to determine the effectiveness of new products. If Goat Island Brewing was thinking to introduce a new product, one way they might test the new product was to see how many people actually try the new product. The number of people who try a product relative to the number of people in the target market is known as the Brand Trial Rate: Brand Trial Rate (%) = Number of customers in target market who have tried the brand / Total number of customers in the target market For example, let‘s assume Goat Island Brewing has come up with a new product idea that they want to sell at their brewpub.…a beer slushy that mixes their Richter‘s Pils and blended fruit. They decide to give this new beverage a trial at a weekend event at the brewpub. They place signage around the brewpub and have the bartenders mention the new product to everyone who orders, but to make sure they get the word out, they also hand each person who enters the door a slip with the description of the new beverage and a coupon for a free sample glass. They collect the coupons at the bar and at the end of the night, they counted 62 coupons out of the total of 500 coupons they gave out at the door.

Number of samples given out Number of customers Brand Trial Rate?

62 500 12.40%

Review the calculation for the brand trial rate. Ask: Can you think of any potential problems with their research methods? How would you improve their approach to be as accurate as possible?

5. Prepare and present findings Figure 5.3 shows different presentations of marketing data. Discuss the importance of providing results that are useful to the marketing manager. Ask the students what they

would expect the report to look like and what information would be presented to the marketing team.

6. Outline follow up and create an action plan Once the findings have been presented, the last stage in the research process is to follow up and develop an action plan. Often this involves providing a decision or an answer to the question posed at the start of the research process. Should the project go forward?

What are the expected first year sales?

Author Podcast 5.1A and 5.1B Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. One of the differences between large and small companies is that: a. small companies don‘t need decision support systems. b. decision support systems for small companies should be less complex and less expensive than those for large companies. c. small companies don‘t need to spend money on market research. d. small companies have more product failures than large companies.

2. A small company can try out more radical ideas because: a. there is less of a decision chain than is found in a small company. b. there are fewer supply chain issues for small companies. c. smaller companies can be more experimental about pricing. d. smaller companies can accept lower profit margins.

3. Market research looks at the external market conditions, while marketing research: a. looks at the brand‘s presence on social media. b. looks at how much money is being spent on advertising. c. looks at the internal marketing systems, the systems, tools, and tactics and how effective they are. d. looks at how quickly new product information is coming into the company.

4. The face wash that Glossier developed is an example of: a. crowdsourcing a product b. using market research in an innovative way c. setting a price based on market feedback d. developing packaging based on market feedback.

Discussion Questions 1. Why is it important to have a decision support system regardless of the size of the company?

2. What are the key differences between market research and marketing research?

3. In what ways did Glossier use market research to help in the development of their new product?

Mini Case 5 Question 1. Do you have any craft breweries near you? If so, what makes them different from the larger international brands?

Answer 1. Answers may differ depending on the availability of craft beer in the students‘ markets. The beer tends to differ in terms of unique flavours and products that can be produced. Craft breweries can appeal more to local tastes and availability of ingredients.

Question 2. What are the pros and cons of a company doing its own research? How reliable do you think answers are when a researcher talks directly to customers, such as when Clay talks to customers in his brew pub about what they are drinking and what they like?

Answer 2. The company understands its products and problems fully, which can make the research plan more effective. It can be more inexpensive to complete the research yourself. However, bias can result because the company believes in its products greatly, and research participants may be more likely to answer questions favourably to the company than an outside researcher.

Question 3. Large companies often spend a lot of money on customer research, paying outside firms to survey hundreds or even thousands of customers, typically by phone or online. Does this necessarily mean a small company gets less useful information than a larger company with a bigger budget for customer research?

Answer 3. It does not mean smaller companies get less useful information. Small companies do not need to conduct research with as many customers like large companies.

It‘s only the scale of the research that differs.

Question 4. Have you responded to a request for research recently from either a company or a research firm? What kind of information was asked for and what do you think the marketing purpose behind the research was?

Answer 4. Students‘ answers will vary.

Discuss the various Canadian companies that have used market research to successfully launch new products or services. What do these stores have in common?

5.1 Concept Check

Question 1: What is a decision support system, and why are these systems so important to marketers?

Answer 1: A decision support system is a systematic approach to collecting information to helps managers make decisions. These systems are relied upon to collect information needed to answer market research questions and are hugely important to marketers because it can help determine purchase patterns and profiles for customers.

Question 2: What is the difference between market research and marketing research, and why is this distinction important in marketing?

Answer 2: Market research refers to a general term covering external research into a component of the market (customers, competitors, company). Marketing research is focused on assessing the effectiveness of a specific marketing tool or tactic. Marketing research involves testing marketing activities to find what works and what doesn‘t, whereas market research is more oriented to specific characteristics or customer preferences like brand, or a company‘s image.

Question 3: What are the six steps in the marketing research process?

Answer 3: The six steps of the marketing research process are: 1.

2.

3.

4.

5.

6.

Define the problem/opportunity Develop a research plan Collect data Analyze the data Prepare and present findings Outline follow up and create an action plan

Question 4: Who is typically involved in creating and implementing the research plan?

Answer 4: Those involved in the initial stage of marketing research (defining the problem/opportunity) should be involved in the creation and implementation of the research plan.

Research Design LO 5.2 List and describe the different primary research objectives and research types in marketing.

The two most critical decisions to make before the research plan can be completed are the research goals and the type of research that the marketer will use to analyze the problem or opportunity. These two decisions are closely tied together since the research goals constrain the type of research needed to solve a problem or answer a research question.

This LO looks at the three primary research goals, and two basic types of research.

Market Research Goals Though the steps of the research process are similar no matter what the research problem might be before the process is undertaken the researcher must decide what the primary purpose of the study might be. There are three main research goals: exploratory, descriptive, and causal.

Exploratory Research Research that seeks to discover ideas and insights related to a problem or opportunity has an exploratory goal. Moon Brewery & Pub conducts exploratory research to discover customer preferences for different beer flavours and which beers customers like to pair with specific food dishes. Often, marketers are unclear about what exactly they should be looking for in their research effort. Exploratory research is sometimes a good first step to finding this out. Ask the class for more examples where exploratory research might be appropriate.

Descriptive Research Descriptive research is a way to collect information about a certain group or topic. It helps marketers understand something by looking at details, behaviours, and attitudes.

This can be done using surveys, watching people, or talking to them. Descriptive goals are the targets for descriptive research, which are all about creating a clear and complete picture of what is being studied. These goals help marketers spot patterns and trends in the information gathered. Descriptive research answers questions about who, what, when, and where something happened. Marketers often conduct research with descriptive goals that involve counts to understand how many customers do something or how often something happens. For example, Moon Brewery & Pub conducts descriptive research by surveying customers to see how many customers are willing to pay $8.00 for a pint of its beer. Descriptive research often leads to additional research but can also lead directly to action. Ask the class for more examples where descriptive research might be appropriate.

Causal Research Finally, causal research seeks to determine the effect of one variable on another. Causal research is a type of research that helps marketers figure out if one thing causes another.

In this research, marketers change on variable to see if it affects another thing, like people‘s choices or how well something sells. Causal goals are the targets for causal research, which focus on understanding if one thing leads to another. These goals help marketers find cause-and-effect relationships between different factors, so they can make better decisions and create more effective strategies. How do changes in price affect sales? Does a specific promotion outperform other promotion options? These are causal research questions that link a specific marketing activity with a specific outcome. For example, if Moon Brewery & Pub changes the name of its new sour from ―Lemon Meringue Sour‖ to ―Vanilla Cream Lemon Meringue Sour‖ and then surveys customers

to see what percentage who try it would pay $8.00 per pint, this project would be causal research since the company would be investigating whether adding the words ―Vanilla Cream‖ will have an effect on the customer‘s willingness to buy the new sour at $8.00.

Ask the class for more examples where additional causal research might be useful for Moon Brewery & Pub. Types of Market Research Marketers use qualitative and quantitative research to achieve their research goals.

Though both research types can be used to achieve all three common research goals, each has its own uses, strengths, weaknesses, and methods, and you can easily remember the distinction between the two by remembering the words quality and quantity.

Display Figure 5.4 ―Research Goals, Types, and Data-Collection Methods.‖ This shows the linkages between the three research goals and the two research formats and provides a note about the type of information collected with each research type. The two research types are described in more detail below. For example, research with an exploratory goal is typically qualitative because the information needed is more open-ended than research with either descriptive or causal goals. If a company were interested in exploring what customers were doing and why, it would conduct qualitative research with an exploratory goal. Quantitative research methods are most typical for descriptive work. For example, if Moon Brewery & Pub wanted to see what percentage of people try ―This is Hippieweizen‖ versus its Moon Juice Raspberry Sour at a tap takeover, it could easily conduct a count to determine the relative sales of each of its beers on tap - both descriptive and quantitative research. Causal goals require highly structured research and analysis methods and are conducted using quantitative research.

Qualitative Research Qualitative research is used by marketers to gain a more in-depth (quality) understanding of a marketing problem or opportunity. It is particularly suitable for investigating underlying reasons customers do or don‘t do something. For example, why is craft beer becoming so popular in recent years relative to beer from the larger breweries? Ask the class for other qualitative research questions they would think the firm would want to better understand. Do consumers drink Moon Brewery‘s beer alone or while in small or large groups? What is the atmosphere like where consumption takes place?

Quantitative Research Quantitative research is used by marketers to count, classify, and measure things to answer descriptive marketing questions such as how much, how many, and how often certain things happen. For example, in our craft beer example, a marketer might discuss craft beer with a group of customers who provide four or five different explanations as to why they buy craft beer (special occasions, tastes better, seems more natural, more

variety, etc.) and then survey more customers to see which of these potential explanations is more common. Combining the results of the two research types could then provide a marketing manager with direction that includes what is most appealing to customers based on the knowledge about why these aspects are most appealing. Ask the class what other quantitative questions they would think the firm would want answered and how they would go about collecting the data.

Author Podcast 5.2A and 5.2B Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Lululemon recognized a pattern of behaviour that they translated into a new category of clothing known as athleisure. The pattern they noticed was that: a. women wanted to have form-fitting clothing b. women started wearing yoga clothing outside of yoga class c. women wanted more expensive clothing to wear to yoga class d. women wanted colours other than black in their athletic clothing.

2. A trend that TSL might consider when doing research on new flavours to introduce is: a. lifestyle flavours b. flavours that other bars offer c. flavours from products that are easy to find d. unusual flavours that no other bar offers 3. An advantage of using both qualitative and quantitative market research is that: a. Qualitative research is less expensive than quantitative research so using both helps a marketer stay within budget. b. Qualitative research is unreliable, so a company needs quantitative research for confirmation. c. The two types of research taken together can provide confirmation that one’s conclusions are valid. d. Qualitative research is time-consuming and needs to be limited to stay on schedule.

4. The appropriate time to do research, both qualitative and quantitative, on advertising is: a. before a campaign is launched, to test customers‘ response b. after an ad campaign is launched, to test the effectiveness of the campaign. c. both before and after d. research isn‘t necessary as long as ad campaigns have very short lives.

Discussion questions

1. What were some of the behaviour trends that Lululemon captured when they introduced their line of expensive, beautiful yoga clothes?

2. What steps might a company like TSL take when exploring the next new flavour to introduce?

3. What are some of the advantages of qualitative research? How does using both qualitative and quantitative provide higher-quality information?

5.2 Concept Check Question 1: What are the three primary market research objectives?

Answer 1: The three primary market research goals are exploratory, descriptive, and causal.

Question 2: What types of questions are employed for each objective?

Answer 2: For exploratory goals, questions that seek to discover insights or ideas related to a problem are used. Descriptive research asks questions about who, what, when, and where something happens to understand how many customers do something, or when they do something, or how often they do something. Causal research seeks to determine the effect of one variable on another (e.g., How do changes in price affect sales?).

Question 3: What is the difference between qualitative and quantitative market research?

Answer 3: Qualitative research helps marketers to gain a more in-depth understanding of a marketing problem, whereas quantitative research is used to count, classify, or measure.

Question 4: What type of research would be most appropriate to answer which types of questions?

Answer 4: Questions like ―Why is craft beer important?‖ or ―Do you like craft beer?‖ can be asked to get qualitative information, whereas questions like ―How much do you spend on beer?‖ or ―How often do you purchase beer?‖ would help to get quantitative information.

Research Implementation LO 5.3 List and describe the common options for data collection and analysis and the relationships between the two.

Once the goal and type of research have been decided, the next research decision is to determine how the research program will be conducted. Implementation covers what information is needed, how to collect it, how to analyze it, and what to do with the results.

Data Sources Data can come from one of two sources. Primary data is information newly collected specifically for the research purpose. The key advantage of primary data is relevance.

Data that already exists, collected for another purpose that can be used to address a research problem, is known as secondary data. The major benefits of using secondary data are that it is typically less costly than collecting primary data, and it also normally speeds up the research process since the data collection stage can in many cases be eliminated or at least reduced.

Display Table 5.3 which lists some common resources for secondary data.

Data Collection and Analysis Methods If primary data are needed, there are a number of common collection methods available depending on the research type. Qualitative research involves data collection methods that provide non-numerical data, while quantitative research methods involve data collection methods that capture numerical data.

Data Collection and Analysis for Qualitative Research Data collection methods for qualitative research include observation, ethnography, focus groups, and personal interviews.

Observation methods involve watching what customers do and recording patterns of interest. Ask the class to describe how they behave in an online shopping environment for vacation travel. How do they search for information? What do they read and why? What does this trail of data tell marketers about their behaviour?

Ethnography is borrowed from anthropology and studies behaviour in a natural context "being the proverbial fly on the wall". The idea is to be around the consumer as they use a product in order to better understand how they behave in their normal environment.

A focus group is a small group of 3 to 12 people, typically customers, assembled to provide feedback about a specific topic. The group is led by a moderator, who guides the discussion to the topics the researcher wants to cover.

Personal interviews are perhaps the most commonly used qualitative data collection method. In marketing, personal interviews are mostly conducted with individual consumers on the consumer market side and with purchasing agents on the business market side. The major advantage of personal interviews is the ability of the interviewer to modify the questions as the interview unfolds, which can provide more detailed and valuable feedback for the company. Personal interviews are also flexible: The topic can be tailored to the individual being interviewed, or a general interview can ask the same questions of many customers.

Data Collection and Analysis for Quantitative Research Common data-collection methods used in quantitative research include surveys, field studies, and technological scanning. Surveys are sets of questions administered electronically, via telephone, or in person, and are the most common data-collection method for quantitative research. Surveys are quick, relatively inexpensive, and if done correctly, easy to analyze. The major problem with surveys is that they are notorious for capturing bad data. Here is a question for you. Ask the class if they have ever filled out a survey and not answered a question truthfully?

A second data collection method for quantitative research is field studies. Field studies are essentially experiments in a real setting. In an experiment, the researcher controls or manipulates one variable while observing the impact of that variable on another variable.

Field studies (also referred to as field experiments) involve marketers controlling or manipulating a variable to determine its effect on another variable. For example, a company could use different versions of an advertisement to determine which one customers like or remember better.

A final, but increasingly important data-collection method used for quantitative research is electronic scanning. Technological scanning involves using technology to collect data.

Often the customer is unaware they are being followed online from site to site or how long they spend at any particular site. With the increased capability of technology to sift through this data to search for patterns—referred to as data mining, marketers have become increasingly knowledgeable about purchasing patterns. This burgeoning data collection and analysis opportunity has given rise to an entire field—called analytics—of researchers who analyze these large data sets to make sense of them for marketers. Ask the class whether data collection methods concern them, from a privacy point of view?

Discuss the ‗Ethical Dilemma‘ feature included in the chapter: Subscription based services, whether gym membership, streaming service, mobile phone, internet, food services, or other, are often set up for autorenewal. With autorenewal, a subscription will automatically begin a new period, and be billed for that period, once the initial period ends. Subscription services are required to warn customers when a period is about to end and the autorenewal is about to restart (and be billed again for the next period), but many customers find it hard to track their subscriptions. Research has shown that autorenewal is especially good for subscription companies, but not necessarily as good for customers.

In one survey, customers were asked to estimate how much each month they spend on subscription services. Customers estimated they spent on average just under $100, but their actual expenses for subscriptions revealed they were actually spending just over $200 per month! Over 40% of identified subscriptions they had forgotten they were paying for but weren‘t using anymore. Autorenewal is a major reason why. Many subscriptions begin with trial periods with autorenewal and consumers forget or don‘t understand they are automatically going to be signed up and billed at the end of the trial period. Some subscriptions autorenew monthly, some quarterly, and some annually, which makes it difficult to keep track of your subscriptions. Proponents of autorenewal tout the convenience for both the company and the consumer. Opponents suggest it is an easy way to complicate consumers billing which makes it more likely consumers will keep subscriptions longer than they use them, especially when some companies make it difficult to cancel subscriptions. This issue has given rise to apps that help track subscriptions, which are gaining in popularity. Discuss with the following questions with the students: Are autorenewal subscriptions ethical? Should they be limited to certain types of products? Should trial subscriptions be able to force you to enter a credit card for autorenewal to receive free trials?

Summarizing Research Findings Once the data have been collected and analyzed, the researcher must summarize the findings so that the results can be used to address the original marketing question. While both qualitative and quantitative results are often described in formal reports and presentations, the key findings are represented differently because the key outputs of the research analysis differ.

Moon Brewery & Pub‘s research might reveal a set of relationships in a ―mind-map.‖ Display Figure 5.8 and ask the class to interpret the qualitative results.

Display Figure 5.9 and Figure 5.10 for examples of quantitative results. Ask the class what can be learned from each of these research outputs? How does this information differ from the qualitative results in Figure 5.8 and what can be learned from those results?

Author Podcast 5.3 Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Primary research is research that marketers do: a. with their own customers b. using resources within the company c. before a new product is launched.

d. at the time of a new product launch.

2. Secondary research is research that: a. is done by a company hired by the product company b. is done as a follow-up to primary research c. is done by third party companies d. is found on the internet.

3. An advantage of using secondary research is that: a. it is inexpensive to acquire b. it is always authoritative. c. it usually has a larger database. d. it can provide insights not gained from primary research.

4. The job of the marketer is to: a. launch advertising campaigns b. predict the future c. develop new product ideas d. oversee the decision support system Discussion Questions 1. How can primary and secondary research work together to provide better market information?

2. How did Glossier use primary research to create their new beauty product?

3. How did Lululemon use primary research to create their new line of clothing?

5.3 Concept Check Question 1: What are the two primary data sources, and what are the advantages and disadvantages of each source?

Answer 1: The two data sources are primary and secondary. Primary data sources provide information that is newly collected for the specific purpose of the research goal at hand.

The advantage of this data is in its relevance, however, collecting this type of data can be costly and take a long time to collect. Secondary data is data that already exists. An advantage of secondary data is that it‘s usually less cost prohibitive and can speed up research time but may not be as relevant to the research question at hand.

Question 2: What are the common data-collection methods for qualitative research, and what are the strengths and weakness of each?

Answer 2: Common data collection methods for qualitative research is observation, ethnography, focus group, and personal interview.

Strengths:

Weaknesses

Observation

Good for detecting behaviour patterns

Ethnography

Captures information in a natural setting; allows researchers to investigate causes for behaviour

Focus group

Provide information quickly; less expensive

Personal interview

Flexible; can be tailored to the individuals or can be more general

Lacks ability to determine underlying causes for behaviour; time-consuming; costly High costs; time-consuming; data collection and analysis require specialized research skills Biased discussion: quality depends on group and moderator Costly; time-consuming

Question 3: What are the common data-collections methods for quantitative research and what the strengths and weakness of each?

Answer 3: Quantitative data collection methods include surveys, field studies, and technological scanning.

Strengths: Weaknesses Surveys

Quick; cheap; easy

Field studies

Effects can be isolated for easy interpretation May be more efficient

Technological scanning

Notorious for capturing bad data May be difficult to control Equipment cost; privacy concerns

Practical Considerations for Conducting Marketing Research LO 5.4 Identify and describe the practical considerations when conducting research in marketing.

Market research is important for both small and large companies, and there are several important practical considerations for conducting research.

First, market research is not simply a single project, but should be an ongoing process.

A second practical implication for marketing research is that market research should be conducted with a specific end in mind. In other words, start at the end and work backwards. Display Table 5.4 and discuss how it can help guide information collection and analysis.

A third practical implication is to get what you need but be careful not to overdo it. Think of research in marketing as an investment. How much should you invest?

Ask the class what other limitations or considerations should be given to conducting marketing research.

Author Podcast 5.4 Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. One way a marketer can know if she is doing too much research is: a. the rate of new insights starts to slow b. the budget runs out c. contradictory results start appearing d. the production schedule for the product is being held up 2. Product testing is: a. just as important as research b. quite expensive so must only be done for priority products c. part of research d. relatively inexpensive so must always be done 3. One way to do product testing that Jasmine Bina mentions is: a. doing in-store demos b. testing a minimally viable product c. having focus groups try the new product d. package the new product with an existing product 4. Bina says that researchers should look for insights that are:

a. supportive of their original assumptions b. contrary to their original assumptions c. surprising d. supportive of earlier research Discussion Questions 1. How can a marketer know that the time has come to move from research to testing?

2. What is the relationship between marketing and testing?

3. What should a marketer look for when evaluating research?

5.4 Concept Check Question 1: What are the key practical considerations for conducting market research?

Answer 1: Practical considerations for conducting market research include the fact that market research is not a single project, but an ongoing one. It must be conducted with a specific end in mind and therefore should start at the end and work towards the beginning. Market research should have the goal of getting what is needed, without overdoing it. Lastly, market research should be thought of as an investment.

Question 2: What are some questions that should be asked before deciding on a marketing research plan?

Answer 2: Before deciding on a research plan, questions such as ―What would I like to find out one my research is complete?‖ and ―How much should my company invest in this research?‖ should be asked.

Application Questions Question 1: Do small companies need a decision support system? Why or why not?

Answer 1: Large and small companies alike need decision support systems. Decision support systems are systematic approaches to collective information that help managers make decisions, so even if a company is small, they can benefit from obtaining useful data in an organized way.

Question 2: Which type provides better results: qualitative research or quantitative research? Justify your choice.

Answer 2: This answer largely depends on the situation and the research goal. Open ended questions such as ―Why does a customer drink a certain type of beverage?‖ are best answered in qualitative research methods. Questions that seek to get counts, such as ―Which percentage of people choose beer at a bar over wine?‖ are best researched using quantitative methods.

Question 3: Discuss the advantages and disadvantages of causal and descriptive goals in the context of marketing. Provide examples of situations in which each type of goal would be most appropriate and effective.

Answer 3: Causal goals provide insights into which variables have the most significant impact. Marketers can use this insight to improve marketing strategies and resource allocation with this type of information. However, causal goals may not completely capture the impact of external factors and it can be expensive to obtain this data.

Descriptive goals give an overall understanding of the market and help identify opportunities in the market. However, descriptive goals may provide general information with a limited ability to predict what might happen in the future. Overall, causal goals provide insights into cause-and-effect relationships and are best suited when a specific marketing tactic needs to be evaluated. Descriptive goals identify trends and help track performance and is effective if a broader understanding of the market is required. A causal goal might look at whether free shipping increases or decreases purchases whereas a descriptive goal would look at whether a different product should be offered.

Question 4: Some consumers will buy cars on eBay and some will not. If you were a marketer interested in researching this issue, which research goal would you use and why?

Answer 4: Answers will vary, however an example research goal might be causal and seek to determine what makes a customer purchase a car on eBay, or what makes a customer refrain from purchasing a car on eBay.

Question 5: Explain how marketers can use observational research and ethnography to gain insights into customer behaviour and preferences. Discuss the strengths and limitations of each method, and provide examples of how they can be applied in realworld marketing scenarios.

Answer 5: The key difference between observation and ethnography is that observation involves watching what customers do and recording patterns of interest, whereas ethnography has marketers observe a customer in a natural context and then ask what they are doing or why they are doing something. Observational research allows marketers to observe the natural behaviour of customers, giving them a deeper understanding of factors that might influence customer behaviours. This type of research can take time to collect, may allow for observer bias, and it does not explain the reasons behind the behaviour. Ethnography allows marketers to explore the motivations impacting customer behaviour and identify evolving trends. This research is also time-consuming and may only focus on a small number of customers. A marketer that wants to understand how shoppers browse in a store might engage in observational research whereas a marketer that wants to determine which new food product a restaurant would introduce would engage in ethnography research.

Question 6: Which of the data-collection methods would allow you to get the most detailed information about when and why a customer uses a particular product? Explain.

Answer 6: Qualitative data collection is most effective in helping to determine who, what, when, where, and why.

Question 7: What is the main drawback of field studies?

Answer 7: The main drawback of field studies is that in order for field studies to be effective and successful, what is to be studied must be isolated, and all other factors must be kept the same. This can be difficult to do.

Question 8: Focus groups are one of the least expensive qualitative data-collection methods and provide relatively quick collection turnaround. Why are they not used more often?

Answer 8: Focus groups are not more popular because there is the possibility that discussion will be biased if not all participants participate equally, and the conversation is dominated by just one or two people. The success of focus groups is also largely dependent on the skill of the moderator and the selection of the group.

Question 9: Describe a scenario where a marketer needs to test the effectiveness of two different advertising messages. Explain which research design and data collection methods would be most appropriate for this situation and justify your choices.

Answer 9: Student answers will vary. An example might be a new slogan for a new business venture. Determining the efficacy of a slogan would best be determined using a qualitative data collection method, such as a focus group or a survey.

Question 10: Evaluate the impact of optical scanning technology and RFID technology on marketing research and decision-making. How do these technologies differ in terms of their capabilities, applications, and implications for marketers?

Answer 10: Current optical scanning uses scanners to record data based on UPC bar codes, whereas RFID uses electromagnetic fields to track tags that are attached to objects.

Information obtained through scanning can help collect sales data, determine customer behaviour and movement, and in some cases track eye movements. This information can provide large data sets for marketers to use. Both types of technology allow for efficient data collection and real-time tracking. The data collected improves operations and creates targeted marketing strategies that drive business growth.

Question 11: Discuss the concept of data mining in the context of marketing research.

Explain the benefits and challenges associated with data mining, and provide examples of how it can be used to uncover valuable insights and inform marketing strategies.

Answer 11: Data mining is done by sifting through data to search for patterns and is popular because it allows marketers to become increasingly knowledgeable about purchasing patterns. Data mining can uncover hidden patterns, can help with customer segmentation and also provide information for future predictions. However, issues with data quality, privacy or data and expertise at sorting through the data may compromise the usefulness of data mining. An example of data mining would include a market basket analysis (determining which products are sold together and using this information to create targeted promotions).

Discussion Questions Question 1: Are surveys trustworthy? Why or why not?

Answer 1: Surveys are notorious for capturing bad data and therefore are not always trustworthy. Trustworthiness is dependent on the way a survey is presented, the way the questions are written, and to whom the survey is administered. A survey could either be very trustworthy if carefully constructed and administered, and data interpreted by a skilled researcher, or be none of those things and be untrustworthy.

Question 2: Is market research or marketing research more important to a new business?

Explain.

Answer 2: Depending on the stage that a new business is in, market research or marketing

research could be more important. A company that is at the very early stages of development, without specific products or goals may find it more beneficial to conduct market research to determine customer preferences for brands, competitors, and their own company. A new business seeking to assess marketing tools or tactics would benefit from marketing research. Generally speaking, a new business would likely find most beneficial information in market research and could use that information to develop products and marketing further, and then would find value in marketing research.

Question 3: You have an idea for a new app and are thinking about doing some research before investing a lot of time in developing it. Your friend says it is a waste of time since you are both in the target market and know the idea will work and appeal to your age group. How do you respond and why?

Answer 3: It is critical to confirm any assumptions before committing time and money.

This can only be done scientifically through accepted marketing research procedures.

Personal bias can lead to poor decisions.

Question 4: Should every research project begin with an exploratory goal? Why or why not?

Answer 4: The goal of exploratory research is to discover ideas and insights related to a problem or opportunity. This can be very helpful when the research area is unclear or has not been studied for a long period of time. That said, when the research question is very focused, it might be unnecessary to explore an already familiar situation.

Question 5: Google, Facebook, Amazon, and virtually all online sites you use conduct research on what you do while you are online. How they use this information varies quite a bit. How does this research benefit these companies? Does it benefit you as a customer?

Answer 5: Much of the information collected online helps to inform targeted advertising, which helps to get products that marketers believe will be successful in an attempted exchange with you or your demographic. This benefits companies as they are able to obtain all sorts of qualitative and quantitative data about buying habits and interests to more successfully target advertisements to customers. In some cases, this can also benefit a customer—products that you are interested in or may want, or need can often be presented to you as opposed to requiring that you seek them out.

Question 6: Now think about your answers to question #5. When websites collection information, they are really conducting research. It can benefit both the company and you. However, there is also a negative side to this type of research. What are the main negatives for customers?

Answer 6: Many people are uncomfortable with websites collecting so much personal data about them that can be used to sell products. This can relate to privacy concerns, as well as the concern that people may be unknowingly participating in research without

giving express consent.

Question 7: Now think about your response to the last two questions. Given your discussion for both positive and negative sides of websites conducting research about what customers do online, do you think this type of research should be allowed or do you customers should have some way to easily opt out of being included? Discuss the ethical considerations and challenges that marketers may encounter when conducting marketing research. Explain the principles of ethical research practice and how marketers can ensure their research efforts adhere to these principles.

Answer 7: Answers will vary widely. Some may be unconcerned about this type of data collection and feel that the benefits far outweigh the negatives, whereas others may argue that customers should either give express consent to be studied and researched or be able to easily opt out of data collection.

Running Case This Saves Lives (TSL) Video Please note: Video Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-Choice Questions 1. Given that TSL is a small startup company, one research tool they have used is: a. email blasts to emailing lists bought from a third party b. local ads on television c. face-to-face demos d. ads in newspapers 2. Another strategy they employ is to: a. network with independent coffeehouses, health spas, and other local businesses b. try two different campaigns and compare the results c. hire an outside company to handle email campaigns d. establish a really strong website.

3. Among the technology tools Ryan mentions is: a. Shopify b. SurveyMonkey c. eBay d. Salesforce 4. A consistent theme in what Ryan says about their research efforts so far is: a. stay with social media b. stay local c. experiment and compare the results d. use secondary data to back up their own data Discussion Questions 1. Describe the kinds of research the TSL team has conducted so far. What seems to be the most successful?

2. If you were on their marketing team, what marketing approach would you suggest they employ next?

3. What kind of data (qualitative or quantitative) should they get more of? Why?

Chapter 6 Using Segmentation, Targeting, and Positioning to Distinguish a Brand Within the Market Segmentation Market Segmentation Definition and Purpose Segmentation Variables LO 6.1 Define market segmentation and describe the four common categories of

variables for segmenting a market.

Applied Segmentation The Segmentation Process Criteria for Effective Market Segmentation LO 6.2 List and describe the six steps in the market segmentation process and describe the key criteria for effectively segmenting a market.

Using Segmentation as a Foundation for Marketing Strategy Targeting Positioning LO 6.3 Define targeting and positioning and describe the purpose and process of each for developing marketing strategy.

Chapter Introduction This chapter a presents an overview of how to group customers and how to select a meaningful group as a foundation to building a marketing strategy. This is done through an understanding of segmentation, targeting, and positioning. The importance of these actions is illustrated in the author video where Pellegrini‘s points can be summarized as follows: (1) Companies must understand what different customers really want and why.

(2) Companies must choose a specific group(s) of customers on which to focus marketing efforts. (3) Companies must differentiate their offerings from competitors‘ offerings in ways meaningful to the specific group of customers on which the company is focused.

Market segmentation and the four common categories of variables for segmenting a market are presented in LO 6.1. LO 6.2 focuses on the six steps in the market segmentation process and the key criteria for effectively segmenting a market. Finally, in LO 6.3 targeting and positioning are defined and the purpose and process of each for developing marketing strategy is discussed.

Industry Expert Video Pat Pelligrini, Formerly of Simmons Research Please note: Video Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-choice Questions 1. Marketing segmentation is critically important because it allows brand managers to: a. identify their target customers and craft an appropriate brand narrative b. create more compelling advertising c. spend marketing budgets more appropriately d. refine the brand message 2. Psychographic research provides information about: a. buying behaviour b. preferences regarding types of advertising

c. product preferences d. attitudes, lifestyles, self-image, etc. of potential customers.

3. One of the main values of micromarketing is: a. it is less expensive than mass marketing b. it is easier to track in a marketing dashboard c. it allows for hypersegmentation d. it focuses on product benefits 4. A downside of heavy reliance on data gathering at the individual level is: a. data quality decreased. b. the amount of data was overwhelming. c. it took too long to analyze the data d. the data were unreliable.

Discussion Questions 1. Why, according to Pat Pellegrini, is market segmentation so important today?

2. Why is psychographics such an important research tool?

3. What are some of the downsides of over-reliance on technology for gathering market research data?

Segmentation LO 1.1. Define market segmentation and describe the four common categories of variables for segmenting a market.

Market segmentation is the process of categorizing groups of customers to divide a market into manageable pieces based on customer differences. Segments refer to groups of customers who share common characteristics within a market. A customer persona is a fictional character created to represent a group of customers that might use a service, brand, or product in a similar way.

Segmentation Variables Marketers use differences to categorize customers into manageable groups, and we can classify these variables in four broad categories: geographic, demographic, psychographic, and behavioural. Table 6.1 identifies the four broad categories and lists common variables in each category. Display Table 6.1 and review the classifications presented before looking at each in greater detail.

Geographic Segmentation In some cases, it makes sense to distinguish customer groups based on geographic location, referred to as geographic segmentation. For example, groups can be segmented based on region (e.g., continent, country, province, state, etc.). Ask the class to suggest when this would make sense by providing examples such as snow tires for people living in wintery environments.

Demographic Segmentation Marketers can differentiate customer groups in a market based on their personal characteristics such as age, income, gender, race, education, marital status, religion, nationality, and so on, which is referred to as demographic segmentation. Demographic segmentation is the most widely used category of segmentation variables and is typically the first approach companies use. Ask the class to suggest when this would make sense by providing examples such as clothing for men and women.

Psychographic Segmentation Psychographic segmentation refers to categorizing customers based on lifestyle, personality, or values. Key segmentation variables used in psychographic segmentation include activities, interests, opinions, social class, and personality. For example, identification of people with a particular attitude such as love of art or animal welfare.

Many marketers use commercially available tools developed specifically to measure lifestyles and psychographic segments. Two of the more popular psychographic segmentation tools include the VALS framework (http://www.strategicbusinessinsights.com/vals/ustypes.shtml) and the Myers &

Briggs (http://www.myersbriggs.org) types. The VALS approach is based on a combination of behavioural, demographic, and attitudes and describes eight categories with labels such as innovators, thinkers, strivers, and experiencers. The Myers & Briggs type indicator is a personality inventory that uses 4 dichotomies (e.g., extraverted or introverted) to describe 16 personality types.

Behavioural Segmentation While psychographic segmentation is based in large part on how consumers think, another more sophisticated approach to segmentation categorizes customers based on what they do. Key variables used for behavioural segmentation include benefits sought, usage rate, usage status, buyer readiness, occasion, and brand loyalty. For example, some customers buy a computer for work, while some use it primarily for play or entertainment.

Two good examples of these more sophisticated segmentation tools include PRIZM and Tapestry. Both of these tools combine elements of all four broad segmentation variable categories. PRIZM, developed by Claritas and later acquired by Nielsen, categorizes customers into 67 different customer segments tied to postal codes. The PRIZM approach (see Figure 6.4) is based on the idea that ―birds of a feather flock together,‖ suggesting that people live near others similar to them. People who live in the same neighbourhood (geographic) often have similar demographic characteristics (income, age, family life cycle), have similar lifestyles and opinions (psychographics), and behave similarly (behavioural). Folks in the ―Gray Power‖ cluster differ significantly from those in the ―Connected Bohemians‖ or ―Money & Brains‖ clusters. Display Figure 6.4 to the class and discuss the results. Ask the class for ideas that might be shown to be true using these techniques.

Segmenting Business Markets Segmenting businesses is similar to segmenting consumers. If you were a restaurant that offered catering, you could consider how close the businesses were to your restaurant (geographic: location). Display Table 6.2 ―Consumer versus Business Segmentation Variables‖ and review the similarities to consumer segmentation.

Author Podcast 6.1 Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Marketing segmentation is:

a. categorizing advertising by type before launching a new product b. dividing the market into manageable pieces. c. assigning value to a market d. deciding which part of the market is most appropriate for a product.

2. The purpose of segmenting a market is: a. to assign probabilities of purchase to each group b. to decide how to allocate marketing budgets c. to understand the differences in buying behaviour of individuals d. to reduce the number of advertising pieces used in a marketing campaign 3. An individual buyer‘s behaviour: a. may be different in different situations. b. is constant with respect to types of purchases made. c. can be tracked online d. is difficult to understand, so it is best to assess market segments by demographics 4. What is a potential result of not acknowledging buying differences according to the video? a. The company can mistakenly use a mass marketing strategy. b. The company can mistakenly use a micro marketing strategy. c. The company can mistakenly use a niche marketing strategy. d. None of the choices are correct.

Discussion Questions 1. What are some examples of buyers making different kinds of purchases in different situations?

2. What is the main advantage of doing market segmentation?

3. How does market segmentation help marketing efforts?

6.1 Concept Check Question 1: What is segmentation, and why is it important for marketers?

Answer 1: Market segmentation is the process of categorizing groups of customers to divide a market into manageable pieces based on customer differences. The purpose of market segmentation is to allow the marketer to develop more focused marketing mixes to meet the needs of one or more segments more effectively.

Question 2: What are the four categories of variables for segmenting a market?

Answer 2: Marketers segment markets into four broad categories: geographic, demographic, psychographic, and behavioural.

Question 3: Which of the four segmentation variable categories is considered most effective?

Answer 3: Many marketers feel behavioural segmentation is more accurate, and therefore more effective, than other segmentation approaches.

Question 4: Which of the four segmentation variable categories is used most frequently and why?

Answer 4: Demographic segmentation is the most widely used category of segmentation variables and is typically the first approach companies use, primarily because it is easy to apply, and demographic information is often readily available. In many cases, it is also quite relevant, since in many markets demographic differences are closely tied to differences in customer behaviour.

Applied Segmentation LO 6.2 List and describe the six steps in the market segmentation process and describe the key criteria for effectively segmenting a market.

The Segmentation Process The six steps in the marketing process include: 1. Define the broad market 2. Narrow the market 3. Select general variable categories for segmentation 4. Choose specific segmentation variables within a selected category 5. Identify categories within each selected segmentation variable 6. Develop a profile for each segment Display Table 6.3 in the class and review the details for each step in the process.

There are several considerations when applying a segmentation approach. First, most companies generally try to use the largest segments possible that will still provide guidance for marketing mix decisions. At the extreme, companies could consider each customer as a segment of one, effectively customizing the marketing mix for each customer. Referred to as micro-marketing, this approach is typically not practical, is very expensive, and is often not necessary. Ask the class if they could suggest a case where this approach could make sense.

Differentiated marketing, also referred to as multi-segment marketing, where companies identify large distinct groups that share similar characteristics, is the more common approach. Ask the class if they could suggest a case where this approach is used.

A more narrowly focused example of segment marketing is niche marketing. In niche marketing the company identifies a subsegment that has special needs that typically is not large enough for the larger competitors in a market to pursue. Ask the class if they could suggest a case where this approach is used.

Criteria for Effective Marketing Segmentation Market segmentation must be carefully done if it is to be effective, since choosing the wrong segmentation approach can derail the company‘s marketing efforts. To be effective, the customer groups must be useful from a marketing perspective. Each group should react differently to marketing efforts and, therefore, require a different marketing

mix with at least one major marketing difference between the groups. Follow the textbook example of "left-handedness" as an effective segmentation approach. For a market segmentation approach to be effective, the customer groups created must meet five criteria. They must be: 1. Identifiable/Differentiable: The marketer must be able to identify the different groups and be able to distinguish between them. (Left-handedness is identifiable because it is relatively easy to tell who is left-handed and who is not.)

2. Measurable: For a segmentation approach to be useful, the segments must be measurable. (Because people can be placed in relatively straightforward categories (left-handed, right-handed, or ambidextrous), this segment is measurable.)

3. Substantial: The groups must be large enough to meet a marketing objective, most often profitability. (Roughly 10% of the world‘s population is left-handed. Men are slightly more likely to be left-handed than women (13% men and 11% women)).

4. Accessible: Groups must be accessible to the marketer to effectively use the specialized marketing mixes created for them. Can they be reached? (If you were a marketer, how would you reach left-handers exactly? Is there a left-handed website?)

5. Responsive: Different marketing mixes should produce different marketing responses from different segments. (In most markets, it is not clear how or why left-handers would be expected to respond any differently to a specific marketing mix than other customers. However, in some cases left-handers will certainly respond differently to different product options. For example, left-handers stand on the opposite side and need different equipment when playing golf.)

Ask the class which segmentation criteria they think various companies use. For example, which criteria is most likely for producers of snow-blowers?

Author Podcast 6.2A and 6.2B Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. As one of the criteria for effective marketing segmentation, accessibility is: a. less important than it once was b. more important than ever c. of equal importance today as it was in the past

d. no longer a criterion 2. The segmentation criterion of responsiveness refers to: a. how customer-oriented a business is b. how successful the marketing message is in reaching the intended segment c. how quickly and successfully the company responds to customer complaints d. how much data is being tracked 3. To determine where to launch their product, TSL has focused on: a. geographic variables for segmentation b. behavioural variables for segmentation c. a combination of demographic and behavioural variables d. a combination of demographic and psychographic variables 4. Which of the following companies does TSL not have a relationship with? a. Target b. Starbucks c. TJ Maxx d. Whole Foods Discussion Questions 1. Why is accessibility less important as a segmentation criterion than it was once?

2. How can the TSL example be applied to other companies?

6.2 Concept Check Question 1: What are the six steps in market segmentation process?

Answer 1: The six steps in the marketing process include: 1. Define the broad market 2.

Narrow the market 3. Select general variable category(ies) for segmentation 4. Choose specific segmentation variables within a selected category 5. Identify categories within each selected segmentation variable 6. Develop a profile for each segment Question 2: What is meant by mass marketing, micromarketing, segment marketing, and niche marketing?

Answer 2: Mass marketing is an attempt to appeal to an entire market with one basic marketing strategy. Segment marketing is an alternative to mass marketing and groups customers into groups or segments to create different strategies for different segments.

Micromarketing is where each customer is thought of as an individual segment and the marketing mix is customized for each customer. In niche marketing the company identifies a subsegment that has special needs that typically is not large enough for the larger competitors in a market to pursue.

Question 3: What are the primary criteria for effectively segmenting a market?

Answer 3: For a market segmentation approach to be effective, the customer groups created must meet five criteria. They must be: 1. Identifiable/Differentiable 2.

Measurable 3. Substantial 4. Accessible and 5. Responsive.

Question 4: To be described as a market segment, does a group need to meet all of the criteria? Why or why not?

Answer 4: The most effective segmentation happens when all 5 criteria are met and if that is not possible you should evaluate whether or not that particular market segment should be pursued.

Using Segmentation as a Foundation for Marketing Strategy LO 6.3 Define targeting and positioning and describe the purpose and process of each for developing marketing strategy.

Every marketing plan should include a clear explanation of the market segmentation, target market focus, and a market forecast. Without considering these aspects your marketing plans may fall short of your goals or become inefficient.

Targeting The purpose of segmenting a market is to highlight the potential differences between groups of customers so that the company can choose on which group(s) to focus its marketing efforts. This process of choosing which group of people or customers a business wants to focus on is called targeting. When evaluating segments, the company will consider two primary factors: the attractiveness of the segment and the company‘s goals and resources. A group of customers the company decides to focus its marketing efforts on is a target market, and a target market should be attractive in terms of potential growth, size, potential for sales and profits, number of customers, and other variables that would suggest the group can provide an effective return on the company‘s marketing investment.

To help decide on a target market, many companies use a three-step process. First, the segments will be ranked in order of attractiveness (e.g., size, growth). Second, the company will identify any segments that should be excluded for ethical, moral, or competitive reasons. Finally, the remaining segments are prioritized based on their potential return on marketing investment. The company has to decide which segments make sense to target, given the investment in resources required relative to the attractiveness.

Discuss the ‗Ethical Dilemma‘ included in the chapter: You meet two friends for lunch from your marketing class and one of your friends seems upset. She says, ―I think I have mentioned that my grandmother is in an assisted living facility. Everyone there is over 75 and my grandmother is almost 80. Her health isn‘t that good. Look what she got in the mail there.‖ She shows you both a promotion addressed to her grandmother. ―It‘s a promotion for funeral services! Can you believe it? Some companies just go too far.‖ While you don‘t say anything right away, your other friend makes the following comment, ―I don‘t know. I don‘t think it‘s terrible or anything. I know nobody wants to talk about funeral services, but you have to talk about it sometime. Better to talk about it before it is needed I think than when it is too late. I read somewhere that funerals were way less expensive if purchased in advance.‖ Ask students the following questions: Is it ethical for funeral companies to promote directly to older consumers in a nursing home or assisted living facility? Can you make a case for your friend‘s grandmother feeling glad or relieved to get the promotion? Would this promotion be more acceptable if the promotion targeted 50-something consumers who have parents in such facilities?

Positioning Once the target market has been chosen, the next step is to develop a positioning strategy.

Positioning is creating a specific perception in the customer‘s mind relative to other options.

A positioning statement clearly spells out the differences between what your company offers customers and what other companies offer and it should guide all marketing efforts for a specific target market. The positioning statement has four components: 1. We: The company, brand, unit that is providing the offer.

2. Target customer: The target customer is clearly identified in terms of the important segmentation characteristics.

3. Key benefit: Target customer wants and the company will provide (sometimes referred to as a unique selling proposition).

4. Competitive reference: Who does the company want the customer to use as a comparison?

As an example, if you owned a local dry cleaning service, you might develop a positioning statement such as: Fast Service Cleaners offers local business people who need fast service the quickest return service for their laundry compared to any drop-off or delivery dry cleaning service within the Calgary, Alberta, downtown area. As this is an internal statement about specific competitors, the actual demographics (if used), and detailed benefit(s) should be included where possible (see Figure 6.7). Display Figure 6.7 and review the details.

Display Table 6.4 Global Companies with Multiple Brands and Targe Audiences as well as Table 6.5 Description of Several Brands within the Marriott Hotel Chain and review the details.

Companies often get the information for the positioning strategy from market research, and customer perceptions of competitive products can be used to develop opportunities for the company‘s positioning strategy. A perceptual map, or graphical representation of customer perceptions of competitive products, is often created to identify positions that are open in consumer‘s minds. Perceptual mapping can suggest product features important to customers, and graphically represents similarities and differences customers perceive for brands. Display Figure 6.9 and review the brands in the map. Ask the class to create a perceptual map of another industry - such as cars.

Sometimes a company decides to change its positioning when it isn‘t working. When this happens, the company can try repositioning the brand by creating a different perception of the brand in the customer‘s mind relative to competitor‘s offerings. Ask the class for

an example where this might have been the case (review the example of Spotify included in the chapter).

Author Podcast 6.3A and 6.3B Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. The marketing message of McDonald‘s is: a. happy family experience b. great food at a low price c. lots of choices d. have a fun night out 2. The marketing message of Burger King is: a. more beef b. have it your way c. better buns d. we love kids 3. Goat Island Brewing Company, a small, local microbrewery, used a segmentation strategy that included: a. demographic and psychographic variables b. demographic and geographic variables c. geographic and psychographic variables d. geographic and behavioural variables 4. Especially for a small company like Goat Island Brewing personal factors may influence: a. product qualities like flavour or style b. market segment to which the product appeals c. price point d. environment in which the product is offered.

Discussion Questions 1. Andrew Loos gives the example of the Beefeater gin campaign to attract younger people to gin as a cocktail choice. Can you think of other examples of products that sought to appeal to one segment of the market and ended up appealing to another?

2. What is the most important factor of a successful segmentation strategy? Defend your answer.

3. How can personal factors affect segmentation strategies?

Company Field Trip Video Influence Marketing Please note: Video Questions do not appear in the ebook and are designed to give

instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Influence Marketing is a: a. integrated marketing agency b. public relations firm c. digital marketing agency d. advertising agency 2. The Senior Director of Strategy: a. finds the best ideas faster b. provides data on what is trending in a variety of areas c. work with companies to help them be more innovative d. uses research to help clients find the best campaign 3. What does Influence Marketing need to ensure when they present themselves to clients? a. they show how they are innovative b. they have four different companies with unique services c. they have a cohesive integrated story d. that have won awards for creativity 4. Influence Marketing has a culture that supports: a. individualism b. upward mobility c. fun d. hard work Discussion Questions 1. What is the business of Influence Marketing? Who are their customers?

2. What services do they provide to their clients?

3. What are some of the ways that the employees stated that marketing differs from their perception in College?

Mini Case 6 Question 1. Are you familiar with Canva? Do the products offered by Canva seem easy to use?

Answer 1. Student answers will vary. Canva has targeted novice designers and therefore, their products are easy to use.

Question 2. How has Canva managed to position itself within the digital design marketplace? Can you create a positioning statement for Canva? .

Answer 2. Canva has positioned itself well in the digital design marketplace. Canva is one of the most competitively priced digital design brands and it has successfully targeted novice designers. Students may create different positioning statements – one possible

positioning statement would be: ―Canva provides a design platform enabling individuals and businesses, with any level of experience, to create stunning visual content effortlessly and its ―freemium‖ strategy sets it apart from its competitors.".

Question 3. Should Canva focus more emphasis on individual end users or businesses with its products?

Answer 3. Answers will vary depending on students‘ experiences. There are benefits to emphasizing individual end users and businesses.

Question 4. What are some of the pros and cons of using Canva as opposed to some of the other products in the industry?

Answer 4. Canva offers a user-friendly interface with numerous templates and design tools. Its different price packages allow users to determine what works best for the.

Canva offers subscription-based pricing, primarily offers online access, and may not suit the needs of users looking for highly specialized designs.

Question 5. While Canva has grown significantly over the past decade, does this growth seem sustainable moving into the future? What will happen now that companies like Microsoft have begun to move into the same market space?

Answer 5. Answers will vary by student. Success of Canva will likely depend on pursuing the right opportunities within the right market segment and changing as technology changes.

Question 6. What advice would you give to the CEO of Canva to help them continue to maximize profits?

Answer 6. Answers will vary by student, but may include ideas such as: focus on customer satisfaction and loyalty, collaborate with strategic partners, continually innovate and differentiate Canva from competitors, expand the market, continually research and adapt new technology, and enhance premium offerings.

6.3 Concept Check Question 1: What is meant by targeting and what are the steps in deciding on a target market for a product?

Answer 1: The process of targeting involves segmenting the market, choosing which segments of the market are appropriate, and determining the products that will be offered in each segment. When evaluating segments, the company will consider two primary factors: the attractiveness of the segment and the company‘s goals and resources.

Question 2: How do marketers select an appropriate target market?

Answer 2: Marketers typically use a 3-step process when selecting a target market. First, the segments will be ranked in order of attractiveness (e.g., size, growth, etc.). Second, the company will identify any segments that should be excluded for ethical, moral, or competitive reasons. Once the segments have been ranked and any eliminated that don‘t fit the company goals or resources, the third step in targeting is to prioritize remaining segments based on potential return on marketing investment.

Question 3: What is positioning, and what are the four elements of an effective positioning statement?

Answer 3: Positioning is creating a specific perception in the customer‘s mind relative to other options. The positioning statement has four components: 1. We: The company, brand, unit that is providing the offer.

2. Target customer: The target customer is clearly identified in terms of the important segmentation characteristics.

3. Key benefit: Target customer wants, and the company will provide (sometimes referred to as a unique selling proposition).

4. Competitive reference: Who does the company want the customer to use as a comparison?

Question 4: Give an example of a situation in which a company might consider repositioning a product or brand.

Answer 4: Student answers will vary.

Discuss with students the ‗Applied Metrics‘ scenario in the chapter: Effective positioning differentiates a brand from competitors in a way that highlights the value of the brand relative to competitive offerings. This should be evident in the market share of the brand.

Market share is calculated as: Market share (%) = (Sales of brand / Total sales in the market for the category) x 100 for % While market share measures the sales of the brand as a percentage of total sales in the relevant market, often companies want to take a closer look at how they perform in the market compared to their main competitor(s). Comparing your market share to that of your main competitor(s) is represented in the calculation of relative market share, and is calculated as follows:

Relative market share (%) = (Market share of brand / Combined market share of main competitors) x 100 for % Assume you work for a company called Omni, which is one of the three major competitors in the local market. Omni has sales of $100,000 per month. The two main competitors are Xtreme with $200,000 in sales per month and Viking with $200,000 in sales per month. The other competitors in the market are much smaller, but together the sales of the smaller competitors is $100,000.

Review with students how to calculate Omni‘s market share and Omni‘s relative market share.

Omni Xtreme Viking All smaller competitors combined Omni market share Omni relative market share

Sales $100,000 $200,000 $200,000 $100,000

16.67% 20.0%

Application Questions 1. Would ―fast food,‖ ―casual,‖ and ―fancy‖ be viable segments for restaurants? Justify your answer.

Answer: Student answers will vary. Students should be able to show how the segments fit into the four broad categories: geographic, demographic, psychographic, and behavioural.

2. Explain why it is possible for two competitors in the same industry to segment a market differently.

Answer: Markets are segmented by four broad categories: geographic, demographic, psychographic, and behavioural. One competitor may focus on one of the four categories while the other focuses on a different category and therefore segments the markets differently. For example: Ford and Lincoln can be considered competitors in the auto industry, but Ford segments are based on geographical variables that will help sell their lines of pickup trucks while Lincoln has traditionally focused on demographic variables that allow marketing certain cars as a better choice for consumers over a certain age.

3. List three products for which geographic segmentation would be important.

Answer: Companies marketing food (e.g., restaurants, grocery products, and specialty products), clothing, vehicles, sports equipment, leisure and outdoor products, real estate, and even services would consider geographic segmentation important since customer product preferences and usage differ by location.

4. What is the difference between demographic and psychographic segmentation?

Answer: Psychographic segmentation refers to categorizing customers based on lifestyle, personality, or values. Demographic segmentation differentiates customer groups based on their personal characteristics such as age, income, gender, race, education, marital status, religion, nationality.

5. Pick a product category you are familiar with and describe which segmentation variables are used in that category to differentiate customer groups.

Answer: Student answers will vary.

6. Describe the segmentation variables A&W Burgers might use? Do these translate to other fast food companies?

Answer: A&W Burgers could use demographic segmentation (segmenting the market based on age, gender, income, occupation, education, etc), geographic segmentation (segmenting the market based on region, country, city, climate, size, etc.), psychographic segmentation (segmenting the market based on lifestyle, attitude, interests, values, etc.),

or behavioural segmentation (segmenting the market based on consumer behaviours, usage patterns, loyalty, buying frequency, etc.). These variables could be used by other fast food companies.

7. What are the steps in the marketing segmentation process? Is it possible to skip steps?

Explain.

Answer: The six steps in the marketing process include: 1. Define the broad market 2.

Narrow the market 3. Select general variable category(ies) for segmentation 4. Choose specific segmentation variables within a selected category 5. Identify categories within each selected segmentation variable 6. Develop a profile for each segment. Each of these steps helps determine the most efficient and effective marketing segmentation plans and none of the steps are meant to be skipped.

8. Consider the five criteria needed for an effective market segmentation approach. Is intelligence an effective segmentation approach?

Answer: The five criteria are: identifiable/differentiable, measurable, substantial, accessible, and responsive. Student answers will vary. Intelligence is identifiable, measurable and likely, accessible, but may not be substantial or responsive. That is, specific intelligence groups may not be large enough to meet a marketing objective as intelligence may not be directly correlated with consumer preferences or needs.

9. Consider Disney‘s positioning statement. ―Disney provides unique entertainment for consumers seeking magical experiences and memories. Disney leads the competition by providing every aspect of related products and services to the world and appealing to people of all ages.‖ Identify each of the four components of the positioning statement.

Answer: 1) We – Disney, 2) Target customer – consumers seeking magical experiences and memories, 3) Key benefit – unique entertainment 4) Competitive reference – "leads the competition by providing every aspect of related products and services to the world and appealing to people of all ages‖.

10. Develop an effective positioning statement for your academic program. How difficult is it to do so?

Answer: Student answers will vary.

11. What are the most common problems in using perceptual maps for positioning?

Provide an example for each problem you mention.

Answer: One of the challenges associated with using perceptual maps is the number of variables used. Traditionally, a map uses two variables and does not account for others.

For example, the map in Figure 6.9 used caffeine and sugar but quality/taste of the drinks

was not taken into account. Another challenge is data gathering. The data needed to form a perceptual map is usually obtained through surveys and this data can be skewed based on perception. In addition, the data is a static measure and can change over time.

Discussion Questions 1. Is behavioural segmentation the best segmentation base? Explain your answer.

Answer: Many marketers feel behaviour is one of the best segmentation options because customers will often do what they have done before. This makes prior behaviour a strong indicator for current and future preferences. Marketers often find they can be more effective when combining different categories of segmentation variables to that accurately highlight and focus on important customer differences.

2. Is market segmentation ethical? Why or why not?

Answer: Student answers will vary. Students should mention that it is not unethical for businesses to understand and target specific groups of consumers based on needs, preferences, and behaviours. Segmentation allows companies to focus their marketing efforts and meet the diverse needs of different customer segments more effectively.

Ethical concerns could arise if segmentation involves discrimination, dishonesty or privacy violations.

3. If you are a marketing manager for Ford, selling trucks to businesses, could you ask your fellow manager who sells trucks to consumers for advice about segmenting your market? Why or why not?

Answer: Student answers will vary. Segmenting businesses is similar to segmenting consumers and the similarities are most obvious in the demographic and geographic variables. Behavioural variables can also be shared between businesses and consumers.

When comparing the two they can differ most with regard to psychographic variables and if these variables are the ones being discussed the information sharing would not be valuable.

4. Do McDonald‘s and Burger King pursue the same target market? Is KFC targeting the same customers too?

Answer: Student answers will vary.

5. Is the concept of a target market consistent with the philosophy of understanding customers? Justify your answer.

Answer: Student answers will vary. In order for target marketing to be successful you have to invest in understanding the customer, so these two aims go hand in hand.

6. Is differentiated (multi-segment) marketing or micro-marketing better from a marketing manager‘s perspective? From a customer‘s perspective?

Answer: Student answers will vary.

7. Is positioning the same as promotion?

Answer: Positioning is creating a specific perception in the customer‘s mind relative to other options. Promotions are then used to reinforce this positioning and to influence behaviour. While not the same thing these two principles are closely related.

8. Is positioning or repositioning more difficult?

Answer: Repositioning is extremely risky and may not be possible if the company has a long history with a specific positioning strategy. It is more difficult than initial positioning.

9. Does every company need to have a unique selling proposition?

Answer: Student answers will vary. Since not every company has or is even able to have a unique selling proposition, the answer should look to the desirability and value of having one.

10. Some would argue that all customers are good customers. How would you respond?

Answer: In that a customer represents successful marketing that delivers a contribution to revenue, some customers present more costs than others. Customers who return merchandise or require other services that reduce revenues and profit are less desirable. It might be worthwhile to consider the contribution to revenue and profit for each customer when weighing the value of any individual customer.

Running Case This Saves Lives (TSL) Video Please note: Video Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-Choice Questions 1. The first step TSL took in finding a retail partner was to: a. list the national brands that might be interested in partnering with a giveback company b. contact Starbucks c. contact small retailers in their area that had a shared mission d. contact independent grocery chains 2. To establish a relationship with Starbucks, the TSL team worked for: a. one year b. one month c. six months d. three years 3. In order to connect with customers and influence their buying behaviour, the TSL started by: a. developing a strong online marketing campaign b. offering significant price discounts to encourage buying c. advertising in local newspapers d. meeting customers face-to-face 4. Starbucks piloted the bars in: a. Denver and Baltimore b. Santa Barbara and Dallas c. Seattle and Washington DC d. Chicago and Atlanta Discussion Questions 1. Explain how the TSL team secured their first retail partners.

2. How did they go about connecting with their customers?

3. What strategy did they use to ensure the success of their bars in the Starbucks pilot program?

Running Case This Saves Lives (TSL) Questions Answers may include the following: 1. What are the key differences between the groups they have identified as possible targets?

While the age range of the four groups is roughly the same, there are noticeable differences in their reasons for buying snack bars, their degree of price sensitivity, their awareness of and commitment to charitable missions, where they tend to buy bars, and how many they buy at a time. One possible option for this discussion is to create a chart and have the students help fill it in individually or via team discussion matching feature importance to each customer group. An example: Customer Coffee Bar Carly Feature Key benefit Comfort, avoid bad taste

Grab & Go Gabe

Workout Wes

Soccer Mom Sandra

Convenience for snack or to replace missed meal

Convenience and healthy snack for kids

Price sensitivity

Medium— notices how much she spends, but will spend on coffee bar visit daily

Social mission

Important— even volunteers once a month for local charity

Low—doesn‘t worry about it during purchase, but is surprised by how much he spends Not important at all—too busy to notice

Energy, premium ingredients for workout— before or after Low—has the money to spend and will spend on energy bars with taste

Somewhat important— donates through work

Somewhat important— donates food/items couple times per year Grocery store

High—looks for coupons

Where they Coffee shop Anywhere sold Upscale buy only grocery How many One at a time One at a time A few at a time Bulk—in box they buy ?? ??

Note: Plenty of ways to design something like this…could even make this a score sheet by assigning points or ranking each factor to help TSL decide which segment is most appealing for them given which one matches what they offer best for each feature.

2. Are there other potential target customers that you can think of, given your knowledge of the snack bar market?

This question will elicit a range of answers and may be good for class discussion.

Possible answers could include profiles such as College Joe or Jane, who carries snack bars to eat while studying or while going from one class to another. This customer purchases bars on campus or at a convenience store; tends to purchase a brand and flavour that he or she has enjoyed before. Could add them to the chart built in Q1 and see how this group compares to those they have identified.

3. Does it make a difference which customer the company decides to target initially if it thinks it will target the other customers in the near future?

It does make a difference and choosing a target market is a balancing act. TSL needs to focus tightly enough on a specific group to appeal to them effectively (deliver an attractive value proposition relative to competitors), but keep in mind that the more closely they become associated with a specific group, the less likely it will be to appeal to other groups. The fact that they use healthy, ―clean‖ ingredients to create a tasty bar will appeal to virtually all of the customer segments they have identified. However, as they make additional decisions about marketing tactics, they will become more appealing to some groups and less to others. TSL should focus on their strengths: better flavour, premium ingredients, giveback mission.

4. What are the pros and cons of targeting each group?

Pros of targeting Coffee Bar Carly include that she could become brand loyal if she finds a flavour she loves and sympathizes with the giveback mission. Cons include that she doesn‘t purchase in quantity, and she is somewhat price sensitive, though she does make room in her budget for her coffee bar visit daily.

Pros of targeting Grab-and-Go Gabe include that he is a committed snack bar customer who isn‘t price sensitive. Cons include that he often purchases on impulse and at places where TSL bars are unlikely to be found.

Pros of targeting Workout Wes include that he buys in greater quantities than some of the other targets, he isn‘t price sensitive, and he cares about the ingredients. The cons include that he isn‘t particularly attuned to charitable causes and targeting him would require a focus on energy bars (narrow category) rather than the more general snack bar category.

Pros of targeting Soccer-Mom Sandra include that she cares about the ingredients and reads labels and that she would probably appreciate the giveback mission of TSL. Cons include that she is very price sensitive and buys bars more as a treat than as a regular meal supplement.

5. Which group would you recommend and why?

This is another question that could make for good class discussion. Students could consider which factor might outweigh others (price, premium ingredients, charitable mission, availability) and which group might have the greatest likelihood of growing as a target market. This would be a great place to revisit the chart created in response to Q1,

particularly if the Q4 discussion brought out more focused profiles for the different groups. Strongest case is probably Carly and weakest case is Sandra.

6. Does it make more sense to target the retailers (e.g., Starbucks, Whole Foods, Target, etc.) or individual consumers?

It certainly makes sense to consider the retailers as well as the consumer given the story of the product. Gaining a retail outlet like Target is obviously appealing because its customer base is so large, but it somewhat dilutes the story of TSL as a gourmet food item made of premium ingredients. It may also be more difficult to communicate the giveback mission to Target customers. Hence, targeting retailers requires consideration of the specific retailer‘s customers. How closely do the customers of the retailer match the desired profile of TSL‘s ideal target customer? One possible activity for the class is to have them think of local options they think would be the best fit for TSL bars.

Running Case This Saves Lives (TSL) Application Exercise Choose two of the customers and do some research to start developing a marketing strategy for a specific group: a. Do some online research to determine the potential for that segment. How many people are in that group? Where are they? Where do they shop? How much do they spend on snacks? Summarize your findings.

This is another good group activity. You might begin by having students discuss where they would go to get the data they need, then discuss how to narrow it. The government has census data that will give raw population numbers, and a variety of sites like the Henry Kaiser Foundation (www.kkf.org) provide statistics on age and geographic distribution. Sites like www.nielsen.com provide information about things like spending habits. b. For each of the two customers, write a positioning statement that communicates what TSL will offer to each specific customer relative to competitors.

Positioning statements might say something like the following:  

 

Coffee Bar Carly: For the person who likes to hang out at the local coffee house, TSL is the only company that offers high-quality, delicious snack bars and gives a healthy meal to a hungry child.

Grab and Go Gabe: For the busy professional who may have skipped a meal or not have time to grab a bite, TSL has snack bars that go beyond the ordinary snacks in flavour and ingredients—Madagascar vanilla, premium dark chocolate and cherry, Blueberry and Pistachio.

Workout Wes: TSL bars are healthier and more delicious than regular energy bars and provide a great nutritious boost as a pre- or post-workout snack for athletes who take their workout seriously.

Soccer Mom Sandra: For caring moms, TSL snack bars offer a more premium, healthier snack than other snack bars in flavours that both parents and kids will love, while helping hungry kids through its buy one/give one program.

Chapter 7 Applying the Marketing Mix The Applied Marketing Mix: From 4Ps to 4Cs Product Affects Customer Benefits Place Affects Convenience Price Affects Cost Promotion Affects Communication LO 7.1 Explain how applying the customer perspective to the 4 Ps yields the 4 Cs. Extending the Marketing Mix to Fit Current Marketing Practice How Current Marketing Practice Affects Marketing Decisions

A Fifth P and C: Participation – Connection Integrating the Extended Marketing Mix LO 7.2 Describe the extended marketing mix with a fifth P and C added to account for current trends that have changed marketing practices.

Chapter Introduction This chapter revisits the concept of the marketing mix, but then describes how a company can apply the marketing mix in a way that considers the customer‘s perspective.

In LO 7.1, the concept of a four Cs framework, comprising Customer benefits, Convenience, Cost, and Communication is presented in a match-up with each of the 4 Ps. The four Cs framework explicitly represents the customer‘s perspective of the marketing mix and encourages marketers to think like customers. Next, LO 7.2 presents an extended marketing mix model that includes a fifth P (Participation) and C (Connection) to account for current trends that have changed marketing practices.

The idea that one approach does not typically work as well as multiple approaches is presented in the industry expert video by Zee Ali of Zee Group, a Chicago distributor of over a million products. Use the video to introduce the marketing mix concept.

Industry Expert Video David Nussbaum—CEO/Founder Proto Inc. and Owen Phillips—Head of Media Proto Inc. Please note: Video questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple-choice questions are bolded.

Multiple-Choice Questions 1. Proto is the world‘s first__________ company. a. artificial reality b. holoportation c. teleportation d. virtual reality 2. Proto has helped companies to do all of the following except_________. a. replace physical mannequins with digital mannequins b. produce holographic fashion shows c. connect celebrities with audiences in real time d. provide a true gaming experience for customers 3. According to Owen Phillips, holograms differ from other interactive experiences because they allow for _________ connections. a. emotional b. physical c. passive d. spiritual e. educational

4. Analytics estimate that Proto customers spend _________ with a hologram and that is _______ than the time spent with other digital displays. a. 30 seconds; less b. 1 minute; more c. 3 minutes; more d. 5 minutes; less Discussion Questions 1. How does Proto help companies connect with customers?

2. How does Proto differ from other portals and what benefit can this have on marketing?

3. Why is interaction so important?

The Applied Marketing Mix: From 4Ps to 4Cs LO 7.1 Explain how applying the customer perspective to the 4 Ps yields the 4 Cs. Display Figure 7.1 The 4Ps of Marketing. Review the meaning of these producercontrolled variables and present examples of each. Ask students to suggest other examples.

Display Figure 7.2 The 4Ps and the 4Cs of Marketing. Review the meaning of the 4Cs as the customer mix of variables that corresponds to each of the 4Ps. Present examples of each and ask students to suggest other examples.

Product Affects Customer Benefits While marketers make product decisions, customers buy products for the benefits they receive from buying and using the product. For example, the restaurant provides a specific menu, but the meal offers multiple benefits from the customer‘s perspective.

When a marketer makes product decisions such as branding, features, packaging, design and so on, each decision should be made with an explicit awareness of how that decision will be linked to specific customer benefits. Ask the class to match specific customer benefits with a product, e.g., feeling safer with a home alarm system.

Place Affects Convenience From the customer‘s perspective, the place decision is primarily one of convenience.

Customers care about how they can get the product, where they can get it, and when they can get it and are willing to make certain trade-offs. Discuss various concepts of convenience, e.g., watching a sporting event thousands of miles away on television at home. Ask the class to suggest other examples of convenience. Here one can expect the convenience of online shopping to be mentioned. Ask how much convenience is added by communication devices like Alexa or smartphone apps.

Price Affects Cost For price decisions (the third P), the firm assigns a value to the benefits it provides customers. For a purchase to take place, customers must agree they are receiving more than they give up in the exchange. From Chapter 2 and our discussion of value, we know customers weigh a product‘s perceived costs to decide whether they will get enough benefits to buy something. Ask the class to suggest the value received from a recent purchase and the cost to them—in money, time, involvement, etc.

Promotion Affects Communication Promotion is the fourth P in the traditional marketing mix framework. Promotion decisions involve deciding how the company wants to communicate with the customer, and communication is the 4th C. From the customer perspective, any interaction with the

company communicates a message whether the company intends to communicate with the customer or not, and regardless of whether the communication takes the form of television advertising, emails, customer service calls, or the website. Ask the class for examples of promotional effort by a company and how they interpreted the communication. Ask if anyone has communicated with a firm they do business with and how that exchange went. Were they satisfied with the level of effort to address their needs?

Author Podcast 7.1A, 7.1B, and 7.1C Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. The most challenging part of integrating the components of the marketing mix is: a. having a strong online presence b. communicating the product or brand message c. setting the right price d. ensuring that all components are consistent with each other and with the message.

2. Drivers for changing a successful ad campaign include having a new competitor enter the market, changing ad agencies or getting a new CEO, or: a. the campaign stops working b. the campaign becomes too expensive c. the primary channel of communication (for example, TV) stops being effective d. the company changes the product 3. Sewell car dealerships have built incredible customer loyalty by: a. offering great deals to repeat customers b. only communicating critical product information to customers c. focusing on the customer cost side in providing benefits d. only selling premium brand cars 4. An advantage that a small start-up may have over larger companies with more resources is: a. it can offer lower prices b. it is more likely to have innovative marketing c. it is more likely to focus on user experience d. it can respond more quickly to changes in the market Discussion Questions 1. What is meant by having consistency in the components of the marketing mix?

2. Would you be more likely to buy from a company that gave you consistently lower prices or consistently better service and perks?

3. What is the main consequence of Sewell‘s policy of complete customer care?

7.1 Concept Check Question 1. What is the 4 Ps framework and what are the 4 Cs? Answer 1: The 4 Ps framework is product, place, price, and promotion. The 4Cs are customer benefit, convenience, cost, and communication. The 4 Ps relate to the 4C as follows:  Product (P) decisions to desired customer benefits (C),  Place (P) decisions to customer expectations and desired levels of convenience (C),  Price decisions to customer perceptions of cost (C),  Promotion decisions to customers‘ communication (C) needs.

Question 2. What is the rationale for adding the 4 Cs to the 4 Ps? Answer 2: The four Cs framework was created to match the 4 Ps to explicitly represent the customer‘s perspective of the marketing mix and encourage marketers to think like customers.

Extending the Marketing Mix to Fit Current Marketing Practice LO 7.2 Describe the extended marketing mix with a fifth P and C added to account for current trends that have changed marketing practices.

How Current Marketing Practice Affects Marketing Decisions There are two major trends changing marketing in recent years. First, in an effort to continually offer more value to customers and build relationships, marketers have begun focusing more attention on providing increasingly positive experiences for customers.

The more extraordinary it is, the more memorable the experience becomes. The value of experiential marketing—creating memorable interactions with brands that appeal to customers‘ senses can be illustrated by asking students to provide a descriptive example.

For example, what was their last air travel experience and what do they associate with the airline brand as a result of that experience? Ask students what airlines could do to add value to the experience. Ask students how businesses are engaging with their customers and whether they think these efforts are working?

A second important trend shaping current marketing practice is the increased use of technology for connectivity. People use technology to stay in touch with each other and the businesses that serve them. Ask the class how they use technology to connect to the businesses serving them and their others. For example, do they search out information on Google? Do they use social media, blogs? How is communication different when using a telephone, email, a website, a text message?

Discuss the ‗Ethical Dilemma‘ included in the chapter: Gaming is an almost 200 billion dollar industry (expected to be $268 billion by 2025!) with over 3 billion players worldwide. Gamers play to relax, fill time while waiting, to be entertained, and a variety of other reasons. While the number and type of games keeps increasing, the most common games are free-to-play. But a closer look reveals most of these games also include the phrase, ―In-App-Purchases‖. As the label implies, free-to-play games can be played for free, but players can spend money within the game to change their gaming experience. Some spending is cosmetic. For example, you could purchase a new avatar or change the appearance of your character. But some spending affects gameplay. Many games offer players the opportunity to purchase additional resources, upgrade character abilities, purchase weapons, and gain other advantages by spending money. And while most games offer players an opportunity to obtain similar resources through free play, a $10 weapon purchase might take a free player months and in some cases years to achieve.

Some special items are only available through purchase in game. Several games have been heavily criticized for seemingly forcing players to spend money to be competitive, earning some games the label, ―buy-2-win‖ games. Ask students if it is ethical for free-toplay games to have in-app-purchases and if so, should there be limits on the type, form, or amount?

A Fifth P and C: Participation–Connection

The rise of experiential marketing and the increased use of technology by customers to stay connected presents an opportunity for marketers to make better strategic decisions by explicitly considering how to manage customer participation with the brand to improve connections. Participation and connection are the fifth P and fifth C. Customers and brands often create and maintain connections though online brand communities—the bond among customers based on common brand purchase, consumption, or desire. Ask the class if they belong to such a community and what their experiences have been?

In co-creation, customers participate in the design or production process with the brand.

Crowdsourcing—the use of individuals or groups outside the organization to provide assistance, advice, or input on a task— has been accessed by a number of companies to fund projects, generate new ideas, and test potential products. Other companies encourage customer participation with the brand through gamification— the use of games to interact with others (especially customers) to make the interaction more engaging and interesting. Ask the class if they have experienced any of these efforts to engage customers and what their experience was like.

Integrating the Extended Marketing Mix Adding the fifth P and C allows us to define the extended marketing mix—the 5Ps and Cs framework that marketers use to facilitate exchanges with a target market.

Display Figure 7.11 and discuss how the original 4 Ps framework expands into the extended marketing mix framework.

There are four key points to remember when applying the framework to make marketing decisions. First, all five Ps and Cs are equally important because all five areas affect the customer‘s experience. Second, the combination of the five Ps and Cs will determine the success or failure of the marketing strategy. Third, any P can affect any C, so decisions in one area can affect other areas. Finally, all five Ps and Cs must be consistent. The order when making mix decisions matters. Though eventually all decisions must be consistent, the process of making the mix decisions flow more smoothly if made in the following order: product, place, price, promotion, participation.

Author Podcast 7.2A, 7.2B, and 7.2C Please note: Podcast Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Experiential marketing is: a. marketing found on the internet

b. marketing of particular products, like cars or restaurants c. email marketing, where the customer is asked to respond to questions or submit reviews d. some sort of sensory interaction with a brand 2. Baby Centre is an example of a: a. online-only company focused solely on babies b. all-in-one company that offers everything for babies c. brand community d. high-end product line 3. The purpose of large lifestyle events hosted by companies like Adobe is to: a. build B2B brand communities b. provide experiential marketing events c. demonstrate extravagant marketing efforts d. overwhelm the competition 4. The marketing mix for Facebook focuses on the place where you park your content; for Instagram, it is about: a. sharing photos b. expanding networks c. the daily share d. creating memories Discussion Questions 1. Explain what experiential marketing is and give 1-2 examples.

2. If you are part of a brand community, explain what it is and how it works.

3. What is meant by saying that B2B is a lifestyle community?

Company Field Trip Video Trendhunter Please note: Video Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Trend Hunter is a: a. marketing firm b. public relations firm c. trend community d. advertising agency 2. The mission of Trend Hunter is to: a. find better ideas faster b. provide data on what is trending in a variety of areas c. work with companies to help them be more innovative d. sell their data to the marketing departments of Fortune 500 companies

3. Trend Hunter is a culture: a. that fosters innovation b. that is built by millennials designed for millennials c. that is focused on growing the business d. that rewards creativity 4. Trend Hunter launched a conference called: a. Trend Setters b. Innovation Station c. Future Festival d. Trend Tomorrow Discussion Questions 1. What is the business of Trend Hunter? Who are their customers?

2. What services do they provide to their clients?

3. What are some of the ways that Trend Hunter could gather data?

Mini Case 7 Question 1. From a consumer standpoint, what do you think about the likelihood of taking a selfie and posting it on your social media when you go to a restaurant? Bar? The orthodontist? A hotel?

Answer 1. Answers will vary by student. Many students may be in favour of posting a selfie from a restaurant, bar, or even hotel. The orthodontist may be less popular until the braces are removed after treatment.

Question 2. What other businesses can you think of that might be appropriate targets for BuzzyBooth?

Answer 2. Events would be a great addition as well as tourist attractions and experiencerelated locations such as escape rooms. Students will develop a variety of answers.

Question 3. Would BuzzyBooth be better off targeting one specific business type, or do you think it is more promising to target any business for which a consumer might consider a photo interesting or useful?

Answer 3. BuzzyBooth does need to establish target markets and develop the 5 Ps and Cs accordingly. However, they can pursue multiple target markets.

Question 4. Go to BuzzyBooth‘s website (buzzybooth.com). What exactly is BuzzyBooth selling and what is their advantage?

Answer 4. BuzzyBooth is selling a marketing campaign solution for customer connection. Their advantage is the unique creation of a customer experience that is tied to promotions and measurement of results.

Question 5. How effective is the use of BuzzyBooth for engaging customer participation?

Do you think that customers who use BuzzyBooth become more connected to the restaurant/bar/orthodontist because they used the kiosk to post a selfie to their social media accounts?

Answer 5. Student answers will vary. According to the information on BuzzyBooth‘s website, the campaign is effective at engaging customer participation. The campaign fits with the trend of taking and sharing selfies everywhere we go, and it offers unique selfies. It does increase connection because the customer sees the brand in their selfies, and it offers a brand experience. Some students may argue that it is not a significant connection.

Question 6. Does the social media posting from the business help strengthen connections between social media contacts, and is this something that benefits the business that uses Buzzy-Booth? Explain.

Answer 6. Connections can be strengthened initially. If the business uses the social media contacts for further marketing, connection can become even stronger. It does benefit the business that uses Buzzy-Booth as customer relationships can be developed.

Question 7. How might legislation in different countries or provinces affect BuzzyBooth‘s customers and adoption rates? And which area of legislation might have the greatest effect?

Answer 7. Privacy laws could impact customers and adoption rates. In some cases, the technology may not be permitted. Permission may be required before selfies are taken and shared on social media, and permission may be needed to further connect BuzzyBooth‘s customers with their own customers.

Discuss the ‗Applied Metric‘ included in the chapter: Effective marketing online involves getting customers to participate and respond in ways the company wants such as visiting the website, looking for product information, and purchasing. Companies measure customer traffic on their website to track their marketing effectiveness at each stage of the customer purchase process. While measuring how many customers actually do what we want is critical to our understanding of marketing effectiveness, measuring what customer don‘t do can also provide valuable information. For example, companies often measure how many people arrive at their website, but do not do anything else and leave after only visiting the first page they encounter on the website. The percentage of website visitors that leave after only visiting a single page is referred to as the bounce rate and is calculated as follows: Bounce Rate (%) = (Number of visitors who only visit one page/Total number of visitors) x 100 for % A more telling metric companies track is to measure what percentage of customers start to do something, but then don‘t complete the action, such as placing merchandise in the shopping cart, but navigating away from the site before purchasing. This is known as the

abandonment rate and is calculated as follows: Abandonment Rate (%) = (Number of abandoned web interactions/Total number of visitors) x 100 for % Assume you have a website selling merchandise. You are tracking customer behaviour on your website and have the following information. You had 1000 visitors in the week. Of the 1000 visitors, 200 only saw the first page and navigated away before doing anything significant on the website. Of the remaining 800, 250 actually put merchandise in their shopping cart. However, 100 of the shoppers who put merchandise in the shopping cart navigated away from the website before marking a purchase, abandoning their cart.

Now that you have practiced with the above scenario, here is some additional data from two more websites. Practice calculating the bounce rate, abandonment rate, and conversion rate based on the following results: Website 1

Website 2

Hits

750

2500

Page Views

3000

2500

Unique Visitors

500

1500

Visitors who left site seeing only first page

50

500

Visitors who placed something in the cart

200

500

Visitors who bought something

150

250

Bounce Rate (x 100 for %) Abandonment Rate (x 100 for %) Conversion Rate (x 100 for %)

7.2 Concept Check Question 1. What are the two major trends in current marketing practice that have changed how marketers do their job?

Answer 1: There are two trends changing marketing practice: (1) increased customer participation with brands and in the marketing process, with marketers trying to provide more positive customer experiences and (2) customers becoming more reliant on technology to connect with brands and each other.

Question 2. What are the fifth P and C added to the extended marketing mix and why were they added?

Answer 2: A fifth P and C: - Participation and Connection were added to accommodate the two trends in marketing practice.

Question 3. What are three important considerations for applying the extended marketing mix?

Answer 3: There are three key points to remember when applying the framework to make marketing decisions: 1. All five P & C elements in the extended mix are equally important. Marketers must consider all five elements thoroughly and with the same level of attention to have a successful mix. 2. The combination of P & C element decisions will determine the success or failure of the marketing program. A great decision in one element cannot make up for a poor decision in another area. 3. All five mix elements must work together. Strategic consistency requires the marketer to consider not just whether the P delivers on the corresponding C (e.g., product decision provides desired customer benefits), but also whether the decisions across elements are consistent (do all five decision elements work together and provide the same value message to the target customer?).

Application Questions 1. Use a local restaurant to provide an example of the 4 Ps marketing mix framework. Be sure to provide a specific example for each P. Answer: Student answers will vary.

2. You may have heard people say that price trumps everything in marketing. Explain to them why each of the four Ps are important.

Answer: All four Ps – product, place, promotion, and price are important. Product affects customer benefits (product features, how it is packaged, and the brand), place affects convenience (how, where and when to get the product), promotion involves deciding how the company wants to communicate with the customer, and price affects the cost.

3. What is the purpose of adding the 4 Cs to the traditional 4 Ps framework?

Answer: In order to add a more explicit focus on customers, the 4 customer Cs were added to the traditional 4 Ps framework providing a more direct customer perspective.

4. Pick any one of your favourite apps. Use the app to describe the 4 Cs and provide an example of each C. Answer: Student answers will vary.

5. You are about to graduate. How would you apply the 4Ps and 4Cs to your job search?

Answer: In looking for a job, I would consider myself as a ‗product‘. I would identify my strengths, skills, experiences, and qualifications and determine how they would meet the needs of my employer (the customer). The second P, price would be the potential compensation I would expect. The second C, cost, relates to the cost to my employer. The third P and C, place and convenience would consist of my ideal geographical location and work environment as well as the work life balance. Lastly, promotion and communication would be how I promote and communicate my skillset to my potential employers.

6. What is experiential marketing? Provide an example.

Answer: Experiential marketing is a marketing strategy that directly engages consumers by creating memorable interactions with brands that appeal to their senses/preferences and encourages them to participate in the evolution of a brand or a brand experience. The text cites various examples including Nike, Mountain Dew, Microsoft, IKEA, and Nestlé.

7. How has technology changed marketing practice in recent years?

Answer: One of the primary motivators for adding the 5th P and C (ParticipationConnection) was consumers increased use of technology and the opportunity for business to connect with their customers via this medium.

8. Can you think of an example when you participated in a marketing event or process?

Describe your participation. Did you feel more connected to the brand or to other customers as a result? Explain.

Answer: Student answers will vary.

9. List three brands you feel connected to and describe what makes you feel connected to them.

Answer: Student answers will vary.

Discussion Questions 1. Is experiential marketing required for a company to be successful in today‘s marketplace? Why or why not?

Answer: Student answers will vary. Students answering yes should mention the increased connection to customers that result from experiential marketing. Customers become ―brand ambassadors‖ and help increase the customer base even further. The degree to which this happens is dependent on how successful the company is. Students answering no will point out that it is intrusive and interferes with the customers‘ privacy in not being able to opt out of the community.

2. How would you respond to the following statement from a business owner: ―We have the best product in the industry. We can sell it anywhere and folks will buy it. That‘s why we are trying to get it in as many places as possible.‖ Answer: Student answers will vary. That said, this is an assumption which means the owner might not be looking carefully enough at product improvements. Sales might be impeded by a poor product or just not the right product for a specific target customer.

3. A brand manager for a local firm tells you that having a Facebook page and a Twitter feed is sufficient to keep customers connected to the brand. How do you respond?

Answer: Student answers will vary. Social media will work but connection to the brand can be achieved in a variety of ways that engage the target customer.

4. Does the extended marketing mix with its 5th P and C offer marketers a ―better‖ way to think about marketing? Explain.

Answer: Student answers will vary. The rise of experiential marketing and the increased use of technology by customers to stay connected presents an opportunity for marketers to make better strategic decisions by explicitly considering how to manage customer

participation with the brand to improve connections. This is done by adding and considering the fifth P and C in the extended marketing mix.

5. If a brand has a very good product, is it still important to try to create a connection by engaging customers through events or social media? Explain.

Answer: Student answers will vary. Engagement builds better relationships with customers and will result in greater sales. The more engagement with customers, the better.

6. Do you make purchasing decisions based on branding? Is this a good thing or not?

Answer: Student answers will vary.

7. Would you consider yourself to be loyal to a specific brand and what would it take to change loyalty?

Answer: Student answers will vary. Think about the 4 C‘s and 4 Ps – product/customer, price/cost, place/convenience, promotion/communication when considering what it would take to change your loyalty to a specific brand.

Running Case This Saves Lives (TSL) Video Please note: Video Questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-Choice Questions 1. The TSL team decided to price their bars: a. at the low end to encourage customers to try their bars b. higher than other bars to emphasize their premium ingredients c. exactly the same as Kind bars, their main competitor d. $1 lower than Kind bars 2. Variable costs for a product like an energy bar include: a. cost of renting equipment and space b. marketing costs c. costs of individual ingredients that go into the bars d. salaries of TSL team 3. Part of the pricing strategy for TSL bars was based on the message; another part of the strategy was to set a price that they could charge: a. when they went into national retailers like Starbucks and Whole Foods b. when they went into Target stores c. when they offered discounts for bulk purchases d. when they achieved scale 4. When TSL bars were first introduced into Target stores, they were: a. priced at a small discount to attract customers’ attention b. priced at the same level as at Starbucks and Whole Foods c. priced at a deep discount to attract customers‘ attention d. priced $1 above Kind bars Discussion Questions 1. Do you agree with the pricing strategy of the TSL team? Defend your position.

2. What are some things that can be done to offset variations in the prices of individual ingredients?

3. What does Ryan mean when he says they decided to set the price at the level they thought it would be when they achieve scale?

Running Case This Saves Lives (TSL) Questions Answers might include the following: 1. What customer benefits do you think Carly wants most when she buys or eats bars?

Carly likes to experiment with flavours, so having a variety of interesting flavours is a benefit for her. She is also cost-conscious, so having a bar that is about the same price as other brands is probably important. Finally, bars are a part of her coffee bar experience that make her comfortable so she feels at home in the coffee bar, and so comfort would also be a benefit she desires.

2. What does convenience mean for Carly?

In a general sense, convenience for Carly means she enjoys the coffee bar for a variety of activities. She studies there, she relaxes there, and she socializes there. Specifically, as it relates to bars, since Carly only buys bars at the coffee house, convenience means having flavours she enjoys available at the cash register.

3. What costs do you think Carly associates with buying and eating bars? Include all costs—both monetary and nonmonetary—with shopping for, buying, and using the product.

The price of the bar is important, of course, as the objective, monetary cost of the bars.

Non-monetary costs could include the potential for a lack of acceptable variety of different flavours she enjoys. Also, note she tries different bars not so much for variety‘s sake as would some customers; rather, she tries different bars to determine which ones to avoid in future. The potential of finding unacceptable bars she doesn‘t like is also a potential cost (could also discuss this in terms of risk).

4. What type of communication do you think Carly expects or wants related to bars?

What message(s) is important to her? How do you think she would prefer a company to communicate with her?

The profile doesn‘t really tell us much about what kind of communication she would respond to best, but since she takes her laptop to the coffee house, she would probably respond well to email communications or other digital communications. Given her profile, she might also respond to communication via her phone. Since she already contributes to charities, she would probably like to have more information about the Plumpy Nut program and how food goes to the organizations that have programs to help malnourished children. She would appreciate additional information about the level of donations so far, and perhaps stories about positive outcomes associated with the BOGO program. A secondary message would address the flavours, particularly focused on her variety seeking to avoid bars she doesn‘t like. This would be a great spot to add an impromptu exercise in class or online, either individually or in small groups, to have students come up with what they think is an ideal message for Carly (best to force a specific type—tweet, for example). This could even be used as a contest with

points/small rewards of some type. Instructors have even used this as a ―take home‖ for either a quiz or as a question on an exam.

5. What do you think would make Carly connect with a brand or with other customers?

Carly is likely to respond well to the philanthropic mission of TSL, so she might be interested in sharing her other charity experiences or information about why she gives.

Application Exercise Now your job is to finish the extended marketing mix outline for the TSL team. Apply the extended marketing mix framework to make marketing decisions by: • Make two specific product recommendations (decisions) to deliver the most important customer benefits for Carly (use your answers from running case Q1).

1. Follow Todd‘s suggestion to explore more interesting names for some of the flavours.

2. Make sure that the coffee house has an inventory of the most popular flavours.

• Make two specific place recommendations to deliver the desired level of convenience for Carly (use your answers from running case Q2).

1. If the coffee house isn‘t already doing so, make sure TSL bars are conveniently placed near the cash register or in line of sight along the queue so customers can see them while they wait to get their coffee or pay.

2. Given Carly likes to have different flavour options, suggest common flavours to stock, but suggest the coffee bar also stock different flavours from time to time. The coffee bar could have a specific ―feature of the day/week/month‖ flavour that was a running display with an explanation of the flavour and perhaps the BOGO on a board or menu.

• Make two specific price recommendations to deliver a good value for Carly (use your answers from running case Q3).

1. TSL bars should be priced near the highest end of the brands in the coffee bar to highlight the premium image.

2. Consider running a ―buy one, get the second one at half off‖ promotion for a short period of time to encourage initial trial, particularly for new flavours. This could also be tied to the ―feature‖ bar mentioned as a place decision idea.

• Make two specific promotion recommendations to communicate with Carly in the manner that is most appropriate and effective for her (use your answers from running case Q4).

1. Create small point-of-sale signs for retailers like the coffee bar that say, ―TSL feeds kids. Find out more about our mission at www.tsl.com‖ or something similar—again, challenge students.

2. Print up post cards to put on the coffee bar tables that tell the TSL story, including stories about kids, with pictures, to demonstrate the effectiveness of Plumpy Nut in restoring malnourished kids to good health.

• Make two specific participation recommendations to make it possible for Carly to connect with (1) the brand and (2) other customers in ways that add value to her experience (use your answers from running case Q5).

1. Create an ―I‘m saving lives‖ program where customers take a selfie in the coffee bar (and elsewhere) eating a TSL bar and submit (text or upload) the photos to TSL to become part of either a collage or perhaps for a contest to win bars.

2. For new trial, TSL could have a BOGO program where customers bought a bar and got one free but were encouraged to give it to someone else. (Would need to get cooperation of coffee bar and similar retailer staff or could do it with packaging or signage.

• Now, go back and see if your recommendations are consistent. If so, you have a mix outline. If not, you need to adjust any that are not consistent.

Chapter 8 Delivering Products and Brands That Meet Customer Needs What Products Mean to Marketers Products Are ―Benefit Delivery Systems‖ Products Are Total Market Offerings The Goods-Services Continuum LO 8.1 Define the term product, explain its relationships to benefits and core values, and understand the implications for marketing strategy.

New Products and Innovation Innovative New Products The New Product Development Process New Product Success and Failure LO 8.2 Understand the differences between new-to-the-world products and new-to-thecompany products, the new product development process, and the strategy implications for product management.

Product Over Time The Diffusion of Innovation The Product Life Cycle LO 8.3 Describe the diffusion of innovation and the product life cycle and appreciate how these two theories affect marketing strategy through the life of a product category.

Product Brands and Branding Brands and Brand Equity Realizing the Value of Brands Through Brand Extension

Brand Partnerships Through Co-Brands Brand Image and the Process of Branding LO 8.4 Define what a brand is and understand how brands create value for customers and marketers.

Chapter Introduction This chapter presents an overview of product strategy that begins in LO 8.1 with the idea that products are benefit delivery systems to customers. The creation and development of new products are framed by discussions about concepts that include innovation, diffusion of innovation, and the product life cycle in LO 8.2 and LO 8.3. Finally, the chapter takes a closer look at branding and strategies related to branding in LO 8.4.

In the industry expert video, Michael Gerber discusses how his book ended up on the shelf to begin with and how marketers make the time between the first and last customers long and profitable.

Industry Expert Video Michael E. Gerber, Bestselling Author Please note: Video Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-choice Questions 1. Michael Gerber says that while creativity means doing something disruptive, innovation is: a. following an incremental process b. doing something new but not market-changing c. creating a product or idea with added features d. successfully creating a series of add-on products 2. Gerber says that the follow-up books to the original E-Myth book were: a. ghost-written b. written at the request of individuals c. co-written with Gerber by people in different fields who applied his principles d. written at the request of his editor to fill specific needs in the market 3. Gerber says that the longevity of his books‘ popularity is that they are based on: a. reality, not an academic formula b. the actual experiences of specialists in various occupations c. rigorous market research d. fields he is passionate about 4. Gerber says that his goal is to be: a. the guru of how to succeed in business b. the McDonald’s of small business consulting c. the best-selling author of the 21st century d. recognized by the elite business schools of the U.S. as the most influential business consultant of the 21st century

Discussion Questions 1. How does Michael Gerber define marketing? How does his definition fit with what you have learned so far in this course?

2. Do you agree with Gerber‘s distinction between creativity and innovation? Why or why not?

3. Based on what you learned in this video, would you say that Michael Gerber has successfully created and marketed his brand? Explain your answer.

What Products Mean to Marketers LO 8.1 Define the term product, explain its relationships to benefits and core values, and understand the implications for marketing strategy.

Products are ―Benefit Delivery Systems‖ Products are a means of providing benefits to people so that people can solve problems and satisfy needs. Successful products are ones that satisfy customer needs and do so in ways that deliver superior value relative to competitors. Ask the class to identify a product and the benefits customers derive from the products. For example, a concert ticket provides entertainment, social contact with friends and fans, etc.

Display Figure 8.1 and ask the class what benefits this product (Fitbit fitness tracker) is promising.

Benefits are categorized into four different groups. After introducing each category, ask the class for another example of each category.

Sensory benefits appeal to one or more of the five senses. Products can look good, feel good, and so on. Products that perform an intended task effectively and efficiently provide functional benefits. For example, when you enter bill pay information into your bank‘s website and then the bank sends the payments as you scheduled them, the bank‘s website has provided the functional benefit it was intended to provide. Resource benefits provide or save customers things that they value, primarily time and money. Consider an insulation company that persuades homeowners to purchase attic insulation under the promise that the purchase will pay for itself in future energy savings. Finally, products may offer psychological benefits, which affect how customers respond emotionally to product purchases. Disney offers magic to its customers, and Volvo provides safety.

Fitbit devices offer functional benefits such as counting steps or measuring the time spent exercising, an equally important aspect to Fitbit‘s positioning is tied to psychological benefits such as self-confidence, drive, and achievement. Psychological benefits can be among the most powerful at developing bonds between customers and brands. More recently, marketers have also begun incorporating core values (essential beliefs that guide customer decision making) into their conception of product benefits. Core values refer to deeply held beliefs and priorities that guide customer decision making. Display Figure 8.2 and ask the class what how virtual purchases can be treated as core values.

Ask the class for examples.

Products Are Total Market Offerings It‘s helpful to think of products as actually occurring on multiple levels, as shown in Figure 8.3, which illustrates how products are really comprised of a core product, an actual product, and an augmented product. Discuss the levels of products as illustrated in the figure and the examples displayed. Then ask students to describe the different

levels of another product. Emphasize that customers might be focused on the benefits of one or more levels when they make their decision to purchase and that marketers need to know at which level(s) their customers are approaching the decision in order to strategize best.

The Goods–Services Continuum Display Figure 8.4 Goods-Services Continuum. Discuss the idea that customers purchase a product or service or sometimes a blend of both. Services are actions or activities performed by the seller for the buyer such as medical care or hair styling. Services account for approximately 70% of Canada‘s gross domestic product. The purchase of a car is mostly about the tangible product but also includes consideration of the services that will be needed over the life of the car. Consumers evaluate both when making their decisions. Ask the class to identify other blended purchases.

Services are distinguished from goods using four concepts: intangibility, perishability, inseparability, and variability. After presenting each concept, ask the class for more examples. Discuss the marketing issues related to these concepts and how marketers can deal with them. For example, a photograph of a someone else‘s haircut can help the customer decide if they would like the same cut.

Intangibility means that services cannot be touched, and therefore cannot be inspected prior to purchase—haircuts or dental procedures for example.

Perishability means that services are consumed as they are produced. Services cannot be stored by the consumer or held in inventory by the service provider. Proper medical advice may lead to years of good health, for example, but the medical consultation itself is consumed as it is provided.

Inseparability means that services are inseparable from their providers. A service is only as good as the person or machine that provides it. A physical good can be judged independently for defects irrespective of how it was manufactured. The same does not hold for service delivery. Your haircut is only as good as the stylist; the medical diagnosis is only as good as the physician making it.

Variability relates to inseparability in that inseparability can lead to variability.

Variability refers to the fact that the quality of a service can vary widely from consumption to consumption and from provider to provider. A stylist who provides a great haircut one visit may provide a less satisfactory cut on another visit.

Author Podcast 8.1

Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. As opposed to Airbnb, Home Away‘s message focuses on: a. features b. benefits c. both features and benefits d. an older customer group 2. A difference between Airbnb‘s message and Home Away‘s is: a. Airbnb considered the features it was offering b. Airbnb looked at the customer before creating the message c. Home Away looked at the customer before creating the message d. Home Away considered the reason people travel before creating the message.

3. Millennials are more likely than other groups to: a. prefer hotels b. prefer high-end travel accommodations c. travel with family d. travel solo 4. An effective way of marketing a service company is to: a. focus on the benefits of the service offered to the target market. b. have a powerful tagline/message c. share best practices in a variety of forums d. use extensive advertising Discussion Questions 1. How did Airbnb gain a competitive advantage over Home Away?

2. How did Airbnb take advantage of the millennials‘ greater likelihood of traveling alone?

3. How can service companies effectively market their company‘s ―product‖?

8.1 Concept Check Question 1: Why are products best thought of as ―benefit delivery systems‖?

Answer 1: Products can be thought of bundles of benefits, e.g., purchasing a car means purchasing the benefits of transportation, safety, style, fun, etc. Thinking of products in terms of the benefits that they deliver to consumers is helpful to marketers because different bundles of benefits will be attractive and appealing to different customers.

Question 2: Think of a recent purchase and list the types of sensory, functional, resource, and psychological benefits it provided. Then think of any product augmentation added to what you bought. How did they enhance the value of what you purchased?

Answer 2: Answers will vary. An example will clearly delineate sensory, functional,

psychological, and resource benefits. Example: Purchase

Laptop

Sensory benefit

Is high-tech and looks good

Functional benefit

Fulfil need for efficient word-processing and internet research

Psychological benefit

Feels good to be able to use a high-tech and sleek computer; feel comfortable knowing that work can be done easily and without having to worry about using someone else‘s computer

Resource benefit

Saves time and money by eliminating the need to go to a library to use a computer

Question 3: Describe and provide an example of the goods-service continuum.

Answer 3: Products are not ―either-or,‖ but rather, they exist on a continuum. Goods and services are differentiated mostly by intangibility, perishability, inseparability, and variability—based on these characteristics, products can be ―mostly goods‖ (e.g., furniture), ―mostly services‖ (e.g., furniture movers), or a balance of the two (e.g., furniture reupholstery).

New Products and Innovation LO 8.2 Understand the differences between new-to-the-world and new-to-thecompany products, the new product development process, and the strategy implications for product management.

This section looks at several concepts important to understanding new product development, beginning with what it means to be a ―new‖ product.

Innovative New Products An innovation is defined as an improvement in a product‘s ability to deliver its primary benefit to customers. We can distinguish between two types of innovations: discontinuous innovations, are the large jumps in a product‘s benefit-delivering abilities. For example, suppose the primary benefit we sought was long-distance communication. Prior to the telegraph, communication was in the form of letters and documents delivered by hand or on horseback. Then the telegraph came along, providing a huge jump in the ability to deliver messages by long distance followed by the telephone, and more recently the Internet. Between discontinuous innovations come smaller incremental improvements to products‘ benefit-delivery capabilities called continuous innovations. The telephone was improved incrementally by continuous innovations such as dial rotary phones that did not require human operators, followed by push button phones and cordless phones and the cell phone.

Display Figure 8.5 and ask if Zoom is a discontinuous innovation or a continuous innovation? Ask for other examples of each category and the reasons students chose them. The smartphone reflects discontinuous innovation because of all the major communications features included including video whereas hybrid cars exemplify a continuous innovation.

Mini Case 8A Question 1. Did your school use Zoom during the pandemic, and if so, what was your experience like with the platform?

Answer 1. Student answers will vary.

Question 2. Could you see a shift to only Zoom classes for your school? Why or why not?

Answer 2. Student answers will vary and be dependent on the type of program they are enrolled in. While it is convenient for some classes (perhaps specialist classes with lower numbers of enrolment), the medical profession advises in person learning is best. As well, some classes depending on content are not as easy to deliver through Zoom. Many arguments could be made for both options.

Question 3. Will users continue to use Zoom for a larger portion of their social interactions in the future, or do you think people will value face- to- face interactions even more, given most people were ―forbidden‖ from face- to- face interactions for a significant period during the pandemic?

Answer 3. Answers will vary. It could be argued that face-to-face interactions will become more important for a while, but an increased use of Zoom may occur in the longer-term.

Question 4. Are there some social interactions that simply cannot be replaced by digital interactions such as Zoom, and if so, which ones?

Answer 4. Some interactions are not fully replaceable by Zoom such as relationships with a significant other. It does depend on the nature of the relationship and other factors such as geography.

Question 5. Industries such as airlines have been significantly impacted by the emergence of Zoom and similar platforms. What other industries can you name that should consider Zoom a competitor?

Answer 5. Zoom could impact the hotel industry since conferences, trade shows, and other events can now be offered virtually. It could also impact tourism as tours and experiences of tourist sites have gone virtual. Students could also present other ideas.

The New Product Development Process Display Figure 8.8 and discuss the three basic steps of the new product development process.

The conceptualization step involves generating and screening ideas and concepts.

Product innovation ideas are loosely worded statements expressed in terms of improvements to existing products or in terms of entirely new products and should focus on meeting customer needs. Ask students to suggest one innovation for an existing product and express this in a sentence.

Ideas that make it past the screening process must be turned into product concepts, which are detailed descriptions and illustrations of proposed new products. Ask the class to describe in detail their earlier innovation idea.

The planning step begins when viable product concepts are considered through the lens of marketing strategy, and initial marketing plans are developed so that the costs of launching and distributing the product can be considered.

In the commercialization step, the processes of creating, producing, and selling the product are put into motion. This begins with creating product prototypes, or working models of the actual products, then testing them with potential customers and finalizing

product designs.

New Product Success and Failure Display Table 8.1 ―Recent New Product Failures‖ and ask the class why they think management might have believed in the success of these products. How important is price when consumers are evaluating a new product? Does price create a barrier for consumers? What can be learned from studying these errors?

Display Table 8.2 ―Some of the World's Oldest and Most Successful Companies and Brands.‖ Ask the class why they think these brands have endured. Ask the class if they think some current brands are likely to live long lives and ask them to explain their reasoning.

Mini Case 8B Question 1: What key lessons can be learned from FTX‘s marketing strategies and tactics?

Answer 1: FTX created a number of partnerships and sponsorships for their service and created ads that were built on the cryptocurrency hype. FTX was able to build their brand and engage communities with their partnerships. They spent significant amounts of money in creative branding and advertising in social media. Unfortunately, the brand did not give sufficient consideration to the unpredictable nature of cryptocurrency.

Question 2: How might FTX‘s collapse affect the reputations and brands of their celebrity influencers, sports teams, and venues?

Answer 2: The collapse of FTX may negatively impact the reputation and brand of their influencers, sports teams, and venues. Since influencers have the power to shape consumer opinions and purchasing decisions, consumers would have relied on the information being provided by influencers, sport teams and venues. With the collapse of FTX, consumers may feel they have been misled, and a general lack of trust may grow with consumers.

Question 3: How can influences protect themselves against false or unethical sponsorship deals?

Answer 3: It is important for influencers to fact-check the accuracy of the information they are providing. Influences should ensure the brands they are endorsing align with their values and interests. They should also ensure that promotions are conducted honestly with full transparency and disclosure.

Question 4: What are some risks and potential downsides of working with new companies or industries? And how might you minimize these risks?

Answer 4: Working with new companies brings a number of risks that may include: a lack of stability, uncertainty, a limited amount of resources, and a lack of reputation. New companies tend to have a higher risk of financial instability and operational challenges.

Proper market positioning and strategy, combined with continual research into the growth potential can minimize this risk. To minimize the risk of uncertainty in market demand and competition, the company‘s value proposition and product-market fit should be assessed. A limited amount of resources will require proper resource allocation and potentially strategic partnerships. Lastly, building a credible reputation takes time, but proper marketing can greatly assist with this.

Question 5: How can other cryptocurrency companies build trust with customers after the FTX collapse?

Answer 5: To build trust, there will need to be transparency in communication.

Companies will need to acknowledge what happened to FTX, why it happened and then communicate how the same thing won‘t happen to them. Companies will need to rebuild relationships and rebuild trust by maintaining consistency, quality and being reliable.

They will need to continuously monitor feedback, actively listen to concerns, and address these concerns in a timely fashion.

Author Podcast 8.2 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. An important question for a company to ask when introducing a new product is: a. What is our return on investment going to be? b. Will the new product help or hurt the brand? c. What should we charge for this new product? d. How should we advertise this new product?

2. The shoe brand Birkenstock recently introduced a line of: a. compression stockings b. fashion shoes c. perfume d. skincare products 3. Uber and Uber Eats are good examples of product lines that: a. amplify each other b. are both very successful c. both entered new markets d. both involve drivers using their own vehicles 4. Compared to a larger, more established company, when introducing product lines that are not clearly related to each other, a smaller, newer company may have:

a. more latitude b. less latitude c. about equal latitude d. no latitude at all Discussion Questions 1. If you were the marketer at Birkenstock, what rationale might you use to customers for the new product line they recently introduced?

2. How do Uber and Uber Eats complement each other? What are some ways that Uber is leveraging the two product lines?

3. What does Jasmine Bina mean when she says that products should help create ―brand worlds‖?

Discuss with students the ‗Applied Metrics‘ feature included in the chapter: One the most significant keys to success of truly new products is to get customers to try the product for the first time. This can be difficult since customers might not be aware of the new product, do not have experience with the new product, and might not understand the benefits clearly. In marketing terms, the perceived value might not be high enough for a potential customer to try the new product. To encourage trial, companies often offer incentives and then measure how effective different incentives might be at encouraging trial.

Brand trial rate is the percentage of a target market that purchases a brand for the first time. It is calculated as a percentage as follows: Brand trial rate (%) = first-time trials in target market ÷ total customers in target market.

Assume you work for a company that has tried two different incentives to encourage customers to try a new product. Option 1 was a promotion via Instagram that offered any customer who purchased the new product within the next week an opportunity to be entered into a drawing for a $100 Visa gift card. 25 customers out of the 1,000 customers in the target market who received the offer purchased the new product. Option 2 was an offer made to shoppers on the company‘s website to receive 20% off on the new product if purchased within the next week via the company‘s website. 10 shoppers purchased the product out of a total of 500 shoppers from the target market who shopped the website in the week. Review with students how the brand trial rate was calculated.

Number of first-time buyers Number of Target Customers Brand Trial Rate (x 100 for %)

Option 1 Instagram Offer 25 1000 2.50%

Option 2 Website Offer 10 500 2.00%

Ask students which Option was more effective for inducing trial of the new product.

8.2 Concept Check Question 1: How do continuous and discontinuous innovations differ, and what role do benefits play in defining both types of innovations?

Answer 1: Continuous and discontinuous innovations differ in the degree to which their product-benefit systems jump. A discontinuous innovation‘s benefits are vastly different than what predated it (e.g., the jump from communication through mail delivered by horseback to the telegraph). A continuous innovation, however, can be used to explain the incremental advances (e.g., rotary phones to push button phones).

Question 2: Must the new product development process necessarily take a great deal of time? When would being thorough in the new product development process be a disadvantage to companies?

Answer 2: While new innovations may be both time- and labour-intensive, new product development need not be unnecessarily slow. This development process can still be deliberate and systematic, while not cumbersome. In many cases, a new product development process that is too slow may inhibit a product from being competitive in the changing market conditions. Simply put, if a company takes too much time to develop a product, they may miss the boat entirely.

Products Over Time LO 8.3 Describe the diffusion of innovation and the product life cycle and appreciate how these two theories affect marketing strategy through the life of a product category.

The Diffusion of Innovation The idea that new technology and the products that utilize the technology spread through markets over time is called the diffusion of innovation. Studies have identified relatively distinct groups of people with demonstrated differences in how readily they adopt new products. While innovation curves are not always bell-shaped, the shape captures the idea that adoption begins slowly, picks up speed, tapers off and then declines. The actual shape of the curve will vary depending on the product.

The general names given to the groups as they adopt new products over time are shown in Figure 8.10. Display Figure 8.10 ―Diffusion of Innovation Adopter Categories.‖ For marketers, the main value of the diffusion of innovation framework is a set of generalizations about the nature of the people who adopt innovations at various points in time. After introducing each category, ask the class to identify and describe customers associated with that category. For example, who are the innovators buying the first models of Tesla?

The first group of people to buy a new product are referred to as innovators, who comprise the first 2% or 3% to adopt an innovation. Innovators tend to be young, willing to take risks, and social, often through extensive use of social media. The next roughly 15% to adopt an innovation are called early adopters. Early adopters have high levels of opinion leadership, meaning that others tend to look to them for information about new products. They also tend to be relatively young and well-educated.

The two categories across the middle of the curve make up the mass market and represent about 7 in 10 people who will ever adopt an innovation. This large majority of adopters is divided into early and late halves. The early majority tends to be more risk averse than early adopters and chooses to wait until the bugs are worked out of product technology.

These people are often well-educated, somewhat older than early adopters and innovators, and actively look to early adopters for product information. The late majority tends to be skeptical of change, which is likely related to somewhat lower levels of education and social standing compared to the early majority.

At the tail of the adoption curve are laggards. Laggards make up the remaining 10% to 15% of adopters. Laggards tend to adopt innovations as a matter of necessity, often when the prior technology is becoming difficult to find. Laggards tend to be older than other groups, with purchase habits often driven by a sense of tradition.

A final group to mention, although not included in the curve (or the market), are the nonadopters. Non-adopters represent a portion of a market that never adopt an innovation.

Generalizations of non-adopters are difficult to make because the reasons for not adopting an innovation can vary widely.

The Product Life Cycle The product life cycle is simply the pattern of growing and declining sales in a product category over time. The pattern of sales implies a corresponding need for changes in marketing strategy, specifically because different groups of adopters are in the market at different stages of the PLC. Display Figure 8.11 and describe each stage of the PLC. Ask the class to identify products that they believe are currently in a particular stage. For example, Tesla cars are in the Introduction stage.

Stages of the Product Life Cycle The development stage of the PLC represents the investments that are made in a product by the pioneering company prior to the launch of the first brand in the category. Note in Figure 8.11 that the red line representing category profits starts at zero and plunges rapidly as costs are incurred but no sales exist yet to offset them.

The introduction stage begins with the launch of the first brand to compete in the category. At this point, the pioneering brand has the often brief advantage of facing no rivals. During this stage, the pioneer wishes to encourage trial of the new product through stimulation of primary demand, which is demand for a product category without regard to brand.

The growth stage of the PLC marks the start of very rapid sales growth in the product category. This occurs for two reasons. One, target markets become aware of the product and— assuming it‘s a good product—begin to buy it. Two, more and more competitors will see the success of the category pioneer and will enter the marketplace and increase category awareness and sales through their own marketing efforts. Given the presence of competing brands, companies begin to concentrate on stimulating selective demand, which is demand for a particular brand within a product category rather than the product category itself. As the category matures and competition separates winning products from losing products, individual company profits may be quite different.

In the maturity stage, product category sales begin to level off. In the face of fierce competition, companies frequently implement incremental improvements to their original models. In other words, they work on continuous innovations. By the time products reach the decline stage, many consumers have moved on to the new technology. Brands still competing in the category experience declining sales and profits.

Variations in the Product Life Cycle Display Figure 8.12 Product Life Cycle Variations The shape of the PLC is usually depicted as a neat and symmetrical bell-shaped curve.

However, this is often not the case. In addition to its standard depiction in Figure 8.11, PLCs can also follow one of three basic variations, which are shown in Figure 8.12. Two relatively common variations of the PLC are called fads and fashions, which are illustrated in Figures 8.12A and B, respectively. Figure 8.12C shows the PLC for a whole host of enduring products that remain largely unchanged for many years.

Author Podcast 8.3 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. The strategy employed by the creator of Angry Birds to extend the product life cycle was to: a. go deep, to build out the property by creating related products b. go wide, by building new mobile games, similar to Angry Birds c. enter an entirely new business—making movies d. offer price discounts to encourage new sales 2. The strategy employed by Disney to extend its brand was to: a. go deep, building on the success of its early products—cartoon feature movies b. go wide, entering a variety of entertainment areas c. enter a new, unrelated business d. offer loyalty programs to customers 3. Going deep allows a company to extract all possible revenue from a brand or product; going wide: a. increases the chance of product failures b. diversifies risk c. allows the company to extract more revenue from each product line d. allows more opportunity for innovative marketing 4. Unlike console gaming, mobile gaming: a. is a high-risk, high-reward enterprise b. has a strong track record of building successful products c. has no formula yet for building blockbusters d. is taking over the gaming market Discussion Questions 1. How have Disney and other similar companies achieved success?

2. If you were a marketer for Angry Birds, what strategies would you employ to improve the company‘s bottom line?

3. What are the advantages of going both deep and wide in building product lines?

Mini Case 8C Question 1. If all Star Wars products including the movies were their own product category, what would its product life cycle curve look like? What stage of the product life cycle would Star Wars be in now?

Answer 1. The product life cycle curve would probably look more like Figure 8.12c. New movies are offered, which gears up excitement, similar to fashion, but the audience continues to be involved with Star Wars for the long-term, which is more like laundry detergent. The life cycle stage is maturity.

Question 2. How would you estimate the equity of the Star Wars brand? In terms of the definition in the chapter, how would you explain brand equity as it relates to Star Wars?

Answer 2. To estimate brand equity, it is easiest to look at the financial value of Star Wars. The price of the offerings could also be compared to those of competitors to determine the premium that Star Wars can charge. Benefits, value, and quality help determine the equity of Star Wars. Star Wars has a long history with many loyal customers, who are willing to pay a premium for the experience of Star Wars products.

Fans are willing to invest their time and money as they see value in the products. The company also invests in Star Wars, which increases its quality. Quality attracts customers.

Question 3. If advertising legend David Ogilvy is correct that ―a brand is a promise,‖ what‘s the promise of the Star Wars brand?

Answer 3. The promise of the Star Wars brand is excitement. It‘s the story of a hero that you want to succeed. There is an emotional investment with the brand.

8.3 Concept Check Question 1: Regarding the diffusion of innovation framework, can marketing to the late majority and laggards be a good marketing strategy? If so, under what circumstances?

Answer 1: Depending on the product and branding strategy, marketing to the late majority and laggards may be a beneficial strategy. However, it must be taken into consideration that early adopters and the early majority are more likely to act as early adopters and early majority across categories and will likely spend more money on products as opposed to the late majority and laggards. It may be inferred that if a group of consumers is late to adopt or hesitant and skeptical across categories, they may be more loyal to whichever product they are resistant to move on from. Finally, as the text points out, often times—especially in terms of electronics—late majority and laggards tend to be older people, and therefore a company may be able to carve out a niche in marketing products that are more focused on that consumer demographic.

Question 2: Why is it most useful to consider the product life cycle from the perspective of an entire category rather than an individual brand?

Answer 2: Product life cycles are best considered from the product category level because they are affected by the competition that comes from multiple brands (e.g., if you sell something like an iPod, the entire category of MP3 players should be considered so a company can compare itself to all competing products that are also in that category).

Brands are not typically competing with themselves, and therefore the product life cycle is inapplicable to brands.

Product Brands and Branding LO 8.4 Define what a brand is and understand how brands create value for customers and marketers.

Strong brands are carefully built and managed. Therefore, we distinguish between the terms brands and branding. Branding is a process. If the process is successful, then the outcome will be strong brands. A brand is simply the name or symbol that identifies a specific business‘s product or service. Brands have two parts. Brand names are the parts of brands that can be spoken. Brand marks include the visual designs, logos, colours, typefaces, and other representations of brands that cannot be spoken. These ideas are illustrated with Figure 8.14. Display Figure 8.14 and ask the class what associations they have with the brand and logo?

Brands and Brand Equity The financial value of a brand is captured in the concept, brand equity. Ask the class if they buy any products that have minimal or no brand equity. Suggest commodity items like sugar or salt. There are four basic approaches to brand positioning strategy: market leaders, market challengers, market followers, and market nichers. A market leader is the brand that is the most influential and has the highest market share. The market leader often has a well-established brand image based on a specific competitive advantage which will allow a higher price. A market challenger is a brand that competes directly with the market leader, trying to take market share by identifying opportunities to gain a competitive advantage. A market follower tends to follow the market leader in most key marketing decisions, but tries to maintain just enough differentiation to not be directly competitive. Followers often have a lower price. A market nicher is a brand that seeks to dominate a small segment or sub-segment of the market – most often a smaller brand that cannot effectively compete directly with larger brands. A market nicher chooses a segment that is often too small for the larger brands to target, but still offers an opportunity for profitability. Discuss with students the example of the pickup truck market or the Smartphone market.

Display Figure 8.15 ―Nike Revives a Classic.‖ Ask the class what the Nike brand means to consumers.

Realizing the Value of Brands through Brand Extensions Placing a brand name on multiple products is a practice known as creating brand extensions. For example, the AXE brand of men‘s products includes deodorants, shower gels, shampoos, styling gels, and more. Ask the class for other examples.

Brand extensions that are in the same or very similar product categories as the original

are called in-category extensions or near-category extensions. These extensions are considered to be safe in the sense that consumers can easily connect the extension to the original product. For example, Tylenol manufactures many different products under the Tylenol name.

Brand extensions can also be out-of-category extensions, meaning that the brand extension is in a completely different category as the original brand. Out-of-category extensions are a riskier investment because as extensions get further away from the original, the connection between the extension and the original becomes weaker in consumers‘ minds. Sunkist is an example of a successful out-of-category extension.

Originally a citrus-farming cooperative, Sunkist started branding its fruit in a very successful strategy of branding what is essentially a commodity product. From its origins in fresh fruits, Sunkist extended to a brand of vitamin C tablets, drawing on the vitamin‘s connection with oranges. Ask the class for other examples.

Brand Partnerships through Co-Brands Co-brands allow one branded product to feature another brand as a component part or ingredient. For example, Tide detergent contains Dawn dishwashing soap to increase Tide‘s grease-cutting power, which is what Dawn is known for. Co-brands often come from different companies. An example is the chunks of Snickers candy bars as an ingredient in Breyers ice cream. Ask the class for possible co-branding ideas.

Brand Image and the Process of Branding Branding is closely related to the concept of brand positioning, which was covered in Chapter 6. Once the positioning of a product has been finalized, marketers must create a brand image consistent with its position relative to competitive brands. As the name implies, brand image is simply the collection of images, thoughts, and feelings that are evoked when exposed to a brand name. In other words, what do you think and feel when you read the names Mercedes Benz, Timex, or Instagram? Marketers can select from several approaches to building a brand image.

1. Build Image on Leadership.

2. Build Image on Key Benefits.

3. Build a Low-Price Image.

4. Build Image Around Your Customers.

5. Build Image on How or When a Product is Used.

Ask the class to name brands that illustrate each of these strategies and to suggest others.

Discuss the marketing decisions that are perceived to be negative in the market and the

impact of celebrity endorsements on various brands.

Discuss the ‗Ethical Dilemma‘ feature included in the chapter: You work for a chemical company. You make insulation materials. One of the by-products of the best process currently known for making these products (used by your company) causes moderate air and water pollution. To this point, your company has always abided by the law. You are concerned because a new city council has mandated lower pollution levels from everyone operating in the city limits. Given their new legal regulations, you know if you continue as you are, you will be forced to pay a yearly fine (at least until they increase the fine) of $250,000. You also know that if you move to a new site, outside the city, you will incur approximately $5 million in expenses. Finally, you know that a new treatment process has been developed that will lower your pollution output below the new legal limit. This option has 2 costs. First, the new process increases energy costs by about $100,000 per year. Also, the estimate for new equipment and retooling costs is $2 million. Ask students what they would do if it‘s their decision? Why? How will your decision impact your brand image?

Author Podcast 8.4 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. To create a brand position, the marketer needs to: a. be somewhat general to appeal to the greatest number of customers in the target market b. study the competitors carefully to understand their brand message c. be bold and specific d. make sure the brand message aligns with the company mission statement 2. The marketer also needs to: a. advertise in all media platforms b. have brand conversations with target customers c. meet face to face with key retailers to explain the brand d. create a loyalty program 3. The Milk brand of skincare products has made an impact by: a. standing out from the competitors in stores like Sephora b. creating a successful online brand community c. creating a line of organic, luxury skincare products d. creating a line of low-cost skincare products 4. For the consumer, an important element of being a brand loyalist is: a. feeling that the brand expresses something about the person using it b. feeling part of a community of like-minded consumers c. feeling valued d. feeling part of an exclusive club

Discussion Questions 1. In your own words, explain what Jasmine Bina says about what is important in positioning a brand.

2. Why are brand communities important?

3. What do you think is meant by having a brand conversation?

8.4 Concept Check Question 1: Think of a recent shopping experience. Did the brand name of the product and its image affect your purchase? Did it affect how much you were willing to pay for the product? For what kinds of purchases do brands not matter?

Answer 1: Responses will vary. An example is as follows: In a recent shopping experience wherein I wanted to purchase a laptop, I considered strongly considered buying a MacBook because many of my peers value Apple products over non-Apple brands, such as HP, Dell, Asus, etc. Knowing that I wanted a MacBook, I was prepared to spend more than if I bought a PC laptop.

Regarding cases where brands do not matter, this obviously varies from consumer to consumer, but generally, people seem to be more concerned with brands when they make big purchases (cars, technology, luxury clothing, etc.). Many people aren‘t concerned with brands for small purchases. The one area this may be untrue is in regard to grocery items. Discussion can be based around why brands do or do not matter to students in terms of groceries.

Question 2: How does co-branding affect the image of both brands? With that in mind, when should co-brands be pursued? When should they be avoided?

Answer 2: Co-branding can be used to convey quality assurances from one brand onto another brands and is most effective when clear connections between brands exist, and those connections are also understandable and believable (e.g., Snickers and Breyer‘s, or Dawn and Tide). Co-branding can have a negative impact and should be avoided in instances where the connection between brands does not make sense (e.g., Snickers and Tide), or is too gimmicky or unbelievable. If co-branding like this is pursued, it can be to the detriment of both brands. Similarly, if one of the brands in a co-branding relationship does not perform to expectation, it can be harmful to both.

Discussion Questions Question 1: Why does is it make sense to think of products in terms of benefit delivery?

Answer 1: Products can be thought of bundles of benefits, e.g., purchasing a car means purchasing the benefits of transportation, safety, style, fun, etc. Thinking of products in terms of the benefits that they deliver to consumers is helpful to marketers because different bundles of benefits will be attractive and appealing to different customers.

Question 2: Why are psychological benefits particularly important in developing longterm relationships between companies and customers?

Answer 2: Psychological benefits of products can be among the most powerful in developing long terms bonds between customers and brands because they are the emotional responses that customers have. Psychological benefits relate to a brand‘s core values which can align to customers‘ deeply held beliefs and priorities that guide decision making. If a brand can successfully appeal to a customer‘s beliefs and priorities, they have likely forged a long-term connection and relationship.

Question 3: How can any product be considered part good or part service? Explain.

Answer 3: A product such as furniture reupholstery can be considered part good and part service because it includes both the intangible aspect of service: the reupholster‘s process of recovering a piece of furniture; and the tangible end product: a recovered piece of furniture that the customer can bring home and put in their home.

Question 4: Why is the product life cycle best considered from a product category level?

Don‘t individual brands have life cycles?

Answer 4: Product life cycles are best considered from the product category level because they are affected by the competition that comes from multiple brands (e.g., in terms of something like an iPod, think of the entire category of MP3 players so as to be able to compare to competing products also in that category). Brands are not typically competing with themselves and therefore the product life cycle is inapplicable to brands.

Question 5: Discuss the challenges that companies may face when attempting to develop and maintain a consistent branding strategy across different channels, markets, or product lines. Share an example of a brand that you believe has struggled with consistency in its branding efforts and explain the potential impact on the brand‘s overall image and reputation.

Answer 5: Branding is the process. The outcome—if the process is successful—is a strong brand. Brands are, simply put, the name and symbol that identifies the product or service as being from a specific company. Building a consistent brand strategy can be challenging as there is the possibility of brand dilution as well as different target customer segments or the need for alignment across different departments within a

company. Different markets many have different preferences, different communication styles, or different messaging. An inconsistent brand strategy can erode consumer trust, dilute brand loyalty, and cause a loss of market share or competitive edge. Examples may vary. One example may be ‗Yahoo‘ which has undergone multiple logo changes, rebranding and shifts in brand positioning over the years.

Application Questions Question 1: Would a consumer who was a lawyer buying a laptop for home use want the same computer as a legal firm buying laptops for its employees at the law office? Why or why not?

Answer 1: A laptop computer could be either a consumer good or an organizational good, depending on the purchaser. A brand could vary their strategy—and therefore almost all elements of the marketing mix—depending on the way they seek to situate the product.

The product would be mostly the same, except in terms of how the computer is packaged—for example, a laptop packaged as an organizational good might include network cables, different accessories, and perhaps different software. The price may be altered depending on the purchaser in that discounts could be provided if an organization purchases multiple computers—a consumer is likely to purchase one at a time. The place may vary slightly, however, it is likely that these types of goods would be available at the same sellers; organizational goods may be more readily available through wholesalers as opposed to retail outlets. Promotion would be the most different part of the mix—if a brand sought to sell a laptop as an organizational good, communications would be targeted to buying centres as opposed to the single consumer. Communications might address different product benefits as well—for an organization, focus may be on the functional benefits over the psychological benefits that may be emphasized in a product situated as a consumer good.

Question 2: Think of your college or university education. In purchasing your education, what is the core product? What is the actual product? What is the augmented product?

How much did product augmentations help you distinguish among your higher education choices? Did they make any difference in your selection?

Answer 2: The core product of a college education is the essential benefit to which a consumer (student) is seeking. This may vary between students, but overall, it‘s most likely to be a degree. The actual product would be the education, new skill sets, and experience. The augmented product will be different for everyone, but in many cases, socializing, exposure to new people, experiences, or thoughts and developing a network (e.g., in fraternities or sororities, clubs, athletics, etc.) are possible. Discussion in the classroom could centre around what each student identifies as the augmented product in their college education.

Question 3: Describe each of the four types of benefits of Apple‘s iPhone?

Answer 3: The four types of benefits are: sensory benefits, functional benefits, resource benefits, and psychological benefits. The Apple iPhone‘s sensory benefits focuses on the look and feel of the phone. The phone is visually appealing and has an intuitive touch screen that enables the user to use it efficiently and effectively. Its functional benefits include the ability to use the phone as a camera, a calendar, a GPS navigation system, a personal assistant, to play games or to communicate with phone calls, messaging or video conferencing. Due to the functional ability of the phone, it has resource benefits. It combines the function of a phone, calendar, GPS navigator, etc all into one device. The ability to communicate and express one‘s ideas or thoughts contributes to the psychological benefits. These benefits are further enhanced by the ability to integrate with other Apple products, leaving the users with a sense of enjoyment and satisfaction.

Question 4: When can being second or third to market with an innovation be an advantage over products that are first to market? Can you think of any recent examples?

Answer 4: Being the first to market may indicate that a brand has perhaps rushed to get a product out. In some cases, this could mean that mistakes were made, or attributes of the product are lacking, or altogether unusable. Being second or third to market could mean that a brand has allowed time to thoroughly develop a product and has been able to observe pitfalls of the first to market and is able to address those before going to market.

An example could be the introduction of the Palm Pilot in the late 1990s that was almost immediately made obsolete by the introduction of smartphones just a few years later.

Question 5: The section on the diffusion of innovation states that laggards tend to be that way for many different product categories. Is it possible for marketers to convince laggards to move up the diffusion curve and adopt innovations earlier? How might you do this?

Answer 5: Laggards tend to adopt innovation out of necessity, not desire. Marketers could potentially convince laggards to move up the diffusion curve if they were able to successfully educate laggards on the pros of a specific product type. In the case of electronics, marketing could potentially centre on making technology more accessible, more comfortable, and easier to understand. If that was done successfully, it‘s likely that laggards could become more easily convinced to adopt innovation before it‘s a necessity.

Question 6: Explain where in the product lifecycle both Winners and Walmart are. Why might they be at different stages of the product lifecycle?

Answer 6: Winners is a retailer offering discounted fashion and home goods. To offer discounted fashions, they often acquire excess inventory or inventory from the last season. These goods that are in the later stages of the product lifecycle – maturity and decline stages. Walmart offers a variety of goods in the retail sector, including clothing,

household items, groceries, and pharmaceuticals. Due to this variety, they carry many products in the introduction and growth stages of the product lifecycle. Walmart will also carry products in the mature or decline product lifecycle. The difference in the product lifecycle between Winners and Walmart lies with the difference in their target markets and in the goods they carry.

Question 7: Describe Coke‘s branding and describe how it compares to Pepsi‘s branding?

Answer 7: The branding for Coke and Pepsi differs due to their target audience. Coke‘s branding relies on a classic or timeless approach by focussing on emotional connections, shared experiences, and nostalgia. Pepsi‘s branding presents a youthful, energetic image, positioning as a company that is always innovative and changing.

Running Case This Saves Lives (TSL) Video Please note: Video Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-Choice Questions 1. The greatest retail challenge for TSL at present is: a. pricing b. number of competitors c. getting and holding good shelf space d. keeping the bars in stock 2. The greatest channel challenge is: a. staying focused on channels where competition is less fierce b. having reliable distribution methods c. maintaining appropriate inventory levels d. getting into pricing wars with competitors 3. A business that offers TSL bars in its company cafeteria is: a. Amazon b. Microsoft c. Google d. Intel 4. The broad strategy for growth of TSL is: a. go nationwide by 2020 b. grow by 25% per year for the next five years c. start boutique, grow into mass d. increase online business Discussion Questions 1. TSL has been successful gaining entry into boutique markets like Whole Foods, spas, and coffeehouses. Are there other such markets that they might consider? How might they do so?

2. If TSL introduces a second product (Ryan mentions bottled water or soap), what should it be? Explain your choice.

Chapter 9 Place Decisions and Customer Convenience What are Supply Chains?

Supply Chain Basics Composition and Structures of Supply Chains LO 9.1 Understand the meaning, composition, and structure of supply chains.

The Importance of Supply Chains The Value of Supply Chains to Consumers What Moves Through Supply Chains?

LO 9.2 Appreciate the value of supply chains to consumers and the importance of what moves through supply chains.

Designing Retail Supply Chains Supply Chain Length: When to Use Intermediaries Product Availability: Selecting Distribution Intensity LO 9.3 Learn how supply chain length and distribution intensity are incorporated into supply chain design.

Retail Supply Chain Strategy: Retailer Selection Retailer Fit: The Importance of Selecting the Right Retailers Push Versus Pull: Convincing Retailers to Carry Brands LO 9.4 Learn the factors affecting retailer selection and the strategies to convince retailers to carry brands.

Power and Conflict in Supply Chains Power in Supply Chains Conflict in Supply Chains LO 9.5 Understand the nature and effects of power and conflict in supply chains.

Relationship Marketing in Supply Chains The What and Why of Relationship Marketing Relationship Marketing and Vertical Marketing Systems LO 9.6 Understand what relationship marketing is and how vertical marketing systems support relationship marketing.

Chapter Introduction This chapter introduces students to the challenges facing businesses as they develop the distribution channels that make their products available to consumers. In LO 9.1, students are presented with a basic explanation of supply chains. The importance and value of supply chains are further developed in LO 9.2. The set-up and design of retail supply chains is the focus of LO 9.3 and strategies for managing them are developed in LO 9.4.

LO 9.5 discusses the issues related to supply chains power and conflict, and the concept of relationship marketing is explored in LO 9.6.

The video interview with Richard Lassalle points to the many challenges his small company, Entube, continues to face as it tries to maintain and grow reliable and efficient supply chains that make its unique gourmet seasonings available when and where customers want them.

Industry Expert Video Richard Lassalle

Please note: Video Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-choice Questions 1. Among the problems with suppliers that Richard LaSalle outlines is: a. delivering on time b. keeping prices stable c. ensuring quality and standards of ingredients d. giving preferential treatment to larger clients 2. An uncontrollable factor that can affect price is: a. an increase in market demand for certain ingredients b. unexpected scarcity of an ingredient c. seasonality—certain ingredients are in higher demand at certain times of year d. bad weather slowing distribution channels 3. In order to establish a stable relationship with a distribution channel, LaSalle found he needed to: a. have a significant number of retailers who stocked Entube products b. have frequent contact with executives at the distribution company c. be willing to pay a premium price to establish a relationship d. ship high volumes of product to various retailers 4. The most frequent demand LaSalle receives from retailers is: a. giving deep discounts on the wholesale price he charges to retailers b. doing in-store demos c. personally delivering the products d. maintaining high inventory levels to avoid stockouts Discussion Questions 1. Describe the issues LaSalle mentioned he has with suppliers of ingredients for his products.

2. What is the process LaSalle followed to secure a distributor for his products?

3. What is the pitfall of doing in-store demos of his products? How might he overcome the problem?

What are Supply Chains?

LO 9.1 Understand the meaning, composition, and structure of supply chains.

Supply Chain Basics Begin with a definition of supply chains, their complexity and importance for successful marketing. A discussion of the covid vaccines may assist students in understanding some of the issues surrounding supply chains. Show the example supply chain in Figures 9.1 to 9.3. Supply chains are the total series of companies, exchanges, and transactions that produce goods and make them physically and commercially available to consumers.

Notice that the definition expands the view of supply chains away from the narrow view of simply moving goods and toward the broader view of exchange that is at the heart of what supply chains actually do. Ask the class to explain why they shop at a particular retailer for some products and what exchanges are made in addition to the actual product.

For example, did they receive helpful information, guidance in making their purchase selection, etc.?

To complement the definition of supply chains, we note that merchandise sometimes flows backwards through supply chains from consumer to producer in what are referred to as reverse supply chains.

Composition and Structures of Supply Chains Two Basic Divisions to Supply Chains Display Figure 9.5 ―Two Parts of a Typical Supply Chain‖ which shows the Industrial and Retail Supply Chain parts.

The class might assume that supply chains only involve getting finished products from producers into the hands of their consumer, but Figure 9.5 also illustrates the industrial supply chain that distributes materials needed by producers. Note that the configurations of industrial supply chains are as varied as products themselves; there are no standard configurations.

The retail supply chain is the series of companies and exchanges required to get goods from the producer to the consumer. Members of retail supply chains also can include what are referred to collectively as marketing intermediaries, which are wholesalers and retailers. Wholesalers are intermediaries whose primary function is to acquire goods from producers and then distribute those goods to retailers, or occasionally, other wholesalers. Retailers are intermediaries who buy merchandise from producers or wholesalers and then resell the merchandise to final consumers.

Discussion point: While about 93% of retail sales occur through physical retail stores, the growth in online sales is remarkable. In Canada, retail e-commerce sales have risen

steadily, with the proportion of online sales rising from 2.4% in 2014 to 6.6% in 2020.

Revenue in the e-commerce market is projected to reach almost $39 billion in 2020, and with an annual growth rate (compound annual growth rate 2020–2024) of 6.8%, revenues are predicted to reach $50 billion by 2024. Ask the class to explain the growth in this phenomenon in terms of the exchanges that consumers want and what they are willing to go without? Suggestion: information from retail staff may no longer be needed for many purchases.

Display Figure 9.6 ―Comparison Between Indirect and Direct Retail Supply Chains‖ and review the reasons some producers would use one or more chains to reach their customers. For example, some retailers no not have their own warehousing services and therefore would buy smaller quantities from local wholesalers.

Figure 9.6 shows three basic supply chain structures, divided into two types: indirect and direct supply chains. Indirect supply chains utilize one or more marketing intermediaries to get products from the producer to the consumer. Producers use direct retail supply chains when selling directly to consumers. Online retailing has driven growth in direct supply chains that bypass physical stores and sell directly to consumers through their websites. Ask students why they buy online, and which exchanges they are willing to forgo or are better because of the online experience. Answers might include saving time or variety of goods available.

Reverse Supply Chains Most supply chains are concerned with moving products from the producer to the consumer, but sometimes there is a need for products to go the other way, from consumer to producer, in what are called reverse supply chains. Generally, reverse supply chains serve two purposes. One is to accommodate returned or defective merchandise while the other is to repair, repurpose, recondition, or recycle returned, worn, or obsolete merchandise. Ask the class to estimate the "costs" of handling a reverse exchange for all parties involved and how this might influence the initial decision to purchase. For example, a consumer might buy from a retailer who is known to make returns and refunds quick and easy.

Author Podcast 9.1 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. For any company, a key element of working with partners in the supply chains is: a. having a shared company philosophy b. delivering on time and as promised c. maintaining good relationships

d. providing regular incentives 2. For a company, one of the most devastating things that can happen is: a. an out of stock of a product b. the appearance of a new competitor that takes market share c. loss of a retail partner d. loss of a key executive 3. Maintaining good relationships with partners in the supply chain is important because: a. bad press can hurt a company‘s reputation b. finding new partners can be very difficult c. the brand/company has little or no control over many elements of product availability d. stress is lower when there is no conflict 4. Members of the supply chain control such key factors as availability, price point, and: a. inventory b. production schedule c. product design d. raw materials Discussion Questions 1. Why are a company‘s relationships with its supply chain partners so important?

2. Outline a possible scenario if a company loses a shipping partner.

3. What is the role of trust in a supply chain?

Mini Case 9A Question 1. Do you have or know someone with an EV? If so, what are the main reasons the buyer gives for purchasing an EV compared with a gas-powered vehicle?

Answer 1. Answers may vary by student but could include sustainability, impact on environment, or keeping up with the trends.

Question 2. Which of the benefits of EVs do you think is the most critical for drawing customers away from purchasing gas-powered vehicles?

Question 2. Environmental concerns are the biggest benefit. Customers need to feel an emotional benefit for buying an EV. Question 3. What do you think is the biggest hurdle in getting a customer who previously owned a gas-powered car to switch to an EV? Answer 3. Price seems to be the biggest hurdle. Reliability for travel and convenience of charging are also key factors.

Question 4. Were you aware of the potential negatives of driving an EV? Which ones were new to you? Has this changed your perspective on EVs at all?

Answer 4. Answers will vary by student.

Question 5. Do you think EVs will become the norm, and if so, when?

Question 5. Students may generally agree that EVs will become the norm. However, it may still take years due to the concerns around the environment, price point, and accessibility of charging stations.

Discuss the ‗Ethical Dilemma‘ feature included in the chapter: Restocking fees charged when you return an item to a store can be significant, sometimes as much as 20% or more of the original purchase price for an item. Some companies justify charging restocking fees as a way to cover additional handling costs required to repackage the merchandise, pay someone to replace the items on the shelf, or repair or replace small items that might be missing when the items are returned. Other companies justify restocking fees to cover the potential loss in value of an item that has been opened or used by a customer since the item now cannot be sold as new to another customer and must be discounted. While these costs may indeed be real costs incurred with returned merchandise, one of the primary purposes for companies to charge restocking fees is to create a barrier for customers returning merchandise. Many customers facing a significant restocking fee might decide to keep the item, especially if the reason for wanting to return it was something minor such as color or style. Companies especially want to avoid repeat offenders who repeatedly purchase merchandise and then return it. Ask students if they think it is ethical for companies to charge restocking fees. Do they think it matters what the justification might be or how much the restocking fee might be? Is it ethical for companies to charge all customers the same restocking fee?

9.1 Concept Check Question 1: How might the growth in online marketing affect the structure of retail supply chains?

Answer 1: Online retailing has driven the growth of direct supply chains in that producers are able to bypass physical retail outlets or stores and sell directly to consumers through their own websites.

Question 2: Can reverse supply chains impact customer satisfaction as much as regular supply chains? How? Answer 2: Reverse supply chains can impact customer satisfaction in a big way—for some consumers, even more so than a retail or indirect supply chain can. If a consumer purchases an item that is broken, defective, or otherwise unwanted, they can return the item to the retailer or producer, often in exchange for a replacement item or a monetary refund. If a retailer or producer does not have a reverse supply chain—that is, they do not accept returns—that will often result in a very negative reaction or opinion from the consumer and could effectively end that relationship between the consumer and producer.

In another case of reverse supply chain—repairs and refurbishing—consumers can send broken, but still wanted items that were previously purchased back to the producer for repair. Again, without a policy like this, consumers may develop a negative feeling about a producer, and this could end the relationship between consumer and producer.

The Importance of Supply Chains LO 9.2 Appreciate the value of supply chains to consumers and the importance of what moves through supply chains.

The Value of Supply Chains to Consumers Display Figure 9.9 ―Intermediaries can make a channel more efficient‖ and discuss how intermediaries can save time and money by reducing the number of contacts between producers and consumers—30 contacts are reduced to 11. Follow the textbook script where consumers had to go directly to manufacturers because shoe stores did not exist.

Develop an appreciation of the valuable role played by retailers as they simplify and facilitate distribution.

What Moves Through Supply Chains?

In addition to the flow of goods down the supply chain is the flow of money back up.

Consumers pay retailers; retailers pay wholesalers or producers; producers pay their suppliers. Another important resource that flows through supply chains is information. A third and very important resource that moves through supply chains are the promotional efforts and assistance supply chain members provide to each other. Ask the class what problems can ensue if money transfers slow or stop in the supply chain. What might cause this to happen? Similarly, ask the class to identify information flow and what can be done to increase it. Finally, ask the class to examine what might happen if one retailer wants to discount the price to the degree that it overwhelms other retailers of the same product.

9.2 Concept Check Question 1: Describe how a well-structured supply chain might provide economic value for supply chain members and consumers.

Answer 1: A well-structured supply chain can save money for both consumer and supply chain member in that the number of contacts needed for a transaction can be minimized to the extent that considerable time, effort, and resources are saved. For retailers, a supply chain that includes a member that specializes in distribution and logistics allows the producer to hand off that part of the supply chain to a unit that is more well-equipped to handle those aspects. This cuts down on the producers‘ need to acquire that specialization

or in the possibility that performing those activities itself will result in errors or significantly more time and money spent doing those activities.

Question 2: How do resources such as money and information that move through supply chains bring value to the final consumer?

Answer 2: Producers may be able to take money earned/saved and information about products and consumers acquired and turn that into promotional activities for retailers.

Often, these promotional activities include discounts—as a means of inventory control or planning—and many times the retailer then passes these producer discounts onto consumers, allowing consumers to save money on purchases.

Designing Retail Supply Chains LO 9.3 Learn how supply chain length and distribution intensity are incorporated into supply chain design.

This section looks at two particularly important structural factors of retail supply chain strategy: retail supply chain length and distribution intensity.

Supply Chain Length: When to Use Intermediaries The question of retail supply chain length boils down to the decisions of whether and how to use marketing intermediaries in order to get products into consumer hands.

When to Use Direct Supply Chains Direct supply chains can occur in one of two basic ways. First, the producer can own and operate its own retail stores. Microsoft, Nike, Apple all operate their own retail outlets.

A less expensive way to establish a direct retail supply chain is through catalogue or online sales, which may be an attractive approach under certain conditions: 1. where pre-purchase inspection is not important 2. where producers have the technological resources to build and support online retail sales 3. when consumers do not need the product immediately Ask the class for examples of products that lend themselves to these conditions.

When to Use Indirect Supply Chains Indirect supply chains use separate retailers and sometimes wholesalers. Many producers and retailers find wholesalers to be useful under some circumstances. For example, producers should include wholesalers in their retail supply chains when wholesalers have better access to retailers than producers do. Wholesalers more frequently serve small retailers. Online or in-person, however, the conditions that favour using wholesalers occur more frequently for small- and medium-sized producers. Ask the class to consider the impact large web services sites like Amazon and Alibaba are having on supply chain relationship—particularly the role of wholesalers.

Mini Case 9B Question 1. What are the pros and cons of using private-labeled, dropshipped products as compared to developing and producing products in-house?

Answer 1. Dropshipping is a convenient and cost-effective way for influencers to sell products online. A wide range of products can be offered and influencers can focus on creating content and building a brand without worrying about the cost or effort involved in inventory management. However, dropshipping products may increase the delivery/shipping time and there is less control over the availability and quality of products offered.

2. How does the use of private-labeled, dropshipped products impact the customer experience and loyalty?

Answer 2. A lack of brand recognition may occur with private-labeled products. There is also a possibility of brand dilution if consumers can find similar products in different sources. However, if influences can build trust in the brand, create a credible product and offer exceptional customer service, this would add to a positive customer experience and create customer loyalty.

3. How does the supply chain for private-labeled, dropshipped products differ from the supply chain for products developed and produced in-house?

Answer 3. The supply chain for private-labeled, dropshipped products relies heavily on partnerships with suppliers, manufactures, and distributors whereas the supply chain for products developed and produced in-house gives the producer more control and management over the entire supply chain. Producing in-house requires manufacturing, production, logistics, and inventory management and gives the company more control over quality of products.

4. How can a company minimize the risks associated with relying on private-labeled, dropshipped products, such as supplier disruptions or changes in consumer demand?

Answer 4. To minimize risks such as supplier disruption and changes in consumer demand companies could do a number of things such as: diversify the number of their suppliers, explore alternative supplier options, perform due diligence before choosing suppliers, establish clear agreements with chosen suppliers, monitor and evaluate supplier performance, and maintain a buffer inventory. Specifically, to address changing consumer demand, companies need to stay flexible and responsive to the changing market. They should also engage in continuous communication with their consumers, always looking for feedback and striving to address any product issues.

5. How does the use of private-labeled, dropshipped products impact a company's environmental and sustainability efforts?

Answer 5. Private-labelled, dropshipped companies can reduce their environmental

footprint by minimizing their direct impact on resources and reducing their waste (no unsold or wasted inventory); however, packaging resources needed may increase. These companies can have an increased focus on sustainability as they can chose their suppliers and manufacturers based on the sustainability and environmental practices or standards of these companies. Product Availability: Selecting Distribution Intensity The level of availability for the product or service is referred to as distribution intensity.

When producers wish to make their products easily obtainable and increase convenience, they select an intensive distribution strategy, which means placing their brand in as many retail outlets as agree to stock them. When producers utilize selective distribution, they place their brands in many but not all possible outlets. Selective distribution generally applies to products consumers are willing to put forth some effort to find in order to get the best value (i.e., they will shop around). Finally, producers sometimes use exclusive distribution by placing their product in few outlets. Most often used for luxury or specialty products, exclusive distribution contributes to brand exclusivity. Ask the class to consider the pros and cons of each strategy. Also, ask for examples of products that fit each strategy.

Discuss with students the ‗Applied Metrics‘ feature included in the chapter: Place decisions have to be made with a consideration for the desired level of convenience the target customer desires and is willing to pay for. One reason a customer might shop in a physical retail store rather than online is for the convenience of getting a specific product immediately. However, this assumes the manufacturer and retailer work together to make the product available when and where customers want to buy. When a customer goes to a store and a product is not available, the customer might decide to get another brand, postpone that purchase until another time, or might go somewhere else to buy it. In either case this is not good for the manufacturer nor the retailer. To keep track of product availability, marketers measure the stockout rate. The stockout rate is the percentage of stores where a product is out of stock relative to the total number of stores that carry the product.

Stockout rate (%) = Number of stores out of the product / Total stores that carry the product Assume you are a marketing manager for Sally‘s Cookies. You have 3 main cookies you sell through convenience stores: Choco-Chippo, Snicker-Doodlers, and Peanut Pals. You have been visiting the stores in your area to determine if your three cookie flavors are available and have the following information from your store visits.

Was the cookie flavor available in the store when visited?

Store 1 Store 2 Store 3 Store 4 Store 5 Store 6

Choco Chippos Yes Yes No Yes Yes Yes

Snicker Doodlers Yes Yes No Yes No Yes

Peanut Pals Yes Yes Yes Yes No Yes

Store 7 Store 8 Store 9 Store 10 Stockout Rate?

Yes No Yes Yes

Yes No Yes Yes

Yes Yes Yes Yes

20%

30%

10%

Discuss the stockout rate for each of the three cookie flavors. Ask students what was learned from visiting the stores and what are the marketer‘s next steps now that the stockout rates for each flavor have been calculated. Determine if the place/convenience plan is effective.

Author Podcast 9.3 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. A company like the bakery Andrew Loos mentions that makes its own products and sells them in a storefront is an example of: a. an indirect supply chain b. a direct retail supply chain c. a simple supply chain d. a one-step supply chain 2. If you make soy candles and sell them at a discounted price to a local candle shop, your supply chain would be: a. a traditional supply chain b. a direct supply chain c. a retailer-only indirect supply chain d. a one-step supply chain 3. Online companies can make money by: a. selling products made by an unrelated company and shipped by another, unrelated company b. offering expedited shipping c. offering discounted prices on most items d. saving on rent and other overhead costs 4. A large company is more likely to have: a. a traditional indirect retail supply chain b. a simply supply chain c. a direct retail supply chain d. a retailer-only indirect supply chain

Discussion Questions

1. When should a company use a direct retail supply chain and when should they use an indirect retail supply chain?

2. What are some advantages of a small company both producing and selling its products? What are some disadvantages?

3. Why would it be difficult for a large company to have a direct retail supply chain?

9.3 Concept Check Question 1: What conditions favour the use of direct and indirect supply chains?

Answer 1: Conditions that favour direct supply chains include the need for owning and operating one‘s own retail outlets (large producers such as Nike, Apply, McDonald‘s, etc.), or in the case where a producer has limited capital, foregoing a retail outlet in favour of a catalogue or online sales structure. This structure is most applicable when pre-purchase inspection is not important (i.e., well-known products and brands), producers have the technological resources to support online retail, and when consumers do not the product immediately. Indirect supply chains are beneficial when a producer needs a wholesaler to be able to access retailers—one wholesaler may have access to hundreds of retailers—and when a producer is small- or medium-sized.

Question 2: Would an intensive distribution strategy favour a direct or indirect supply chain? What about selective and exclusive distribution?

Answer 2: An intensive distribution strategy would favour an indirect supply chain—a producer could utilize a wholesaler to reach hundreds of retailers. Exclusive distribution would make most sense in a direct supply chain—either for a small company that is perhaps one owner-operated retail outlet, or in the case of some technology, items are only available at the producer‘s retail outlets, and not at a big box store or national department store. Selective distribution would likely work best with an indirect supply chain, in that consumers would have access to shop around at multiple retailers for the best value.

Retail Supply Chain Strategy: Retailer Selection LO 9.4 Learn the factors affecting retailer selection and the strategies to convince retailers to carry brands.

Producers might want to distribute their products in a specific retailer, but some desirable retailers may have little interest in stocking a particular product. They must be convinced that doing so will bring them superior financial returns. In this section, students should be introduced to the selection process and the concept of retailer fit, and secondly how producers go about convincing retailers to carry their product.

Retailer Fit: The Importance of Selecting the Right Retailers The issue of retailer fit boils down to a single simple but critical question: Does my brand belong in a particular retail store? The criteria include: Retailer Reach Retailer reach is the ability of a retailer to attract consumers in a producer‘s target market or markets. Reach is a function of who a retailer attracts to the store or website and whether the retailer is located where the producer needs it to be.

Retailer Type In much of retailing, the store is still the key. Mass merchandisers are very large retail stores that specialize in selling large volumes of merchandise at low prices. Discount stores such as Walmart and Target, warehouse clubs such as Sam‘s and Costco, supermarkets such as Sobeys, Safeway, and the Real Canadian Superstore, and box stores such as Home Depot, Canadian Tire, and Best Buy are all mass merchandisers.

Department stores are also large stores that feature apparel and home furnishings but are usually smaller than mass merchandisers. While service levels in department stores are still limited, the stores themselves feature nicer interior spaces than the typical mass merchandiser. Examples of department stores include Holt Renfrew, Hudson‘s Bay Company, Simons, and Nordstrom. Specialty stores are physically much smaller in space than mass merchandisers and department stores. They carry narrow and deep inventories and usually feature high levels of customer service. Category killers are large retailers that specialize in a specific product category (such as office products, books, or sporting goods). They compete based on large and deep product assortments in the category offered at low prices, which gives them a distinct advantage over department stores and other retailers carrying products in the category. Examples include Staples and Chapters Indigo.

Retailer Image

Retail stores are brands every bit as much as products are. As such, they cultivate images that position the stores in consumers‘ minds just as product marketers do. Ask students what comes to their minds when they hear the name Walmart? Lululemon? etc. Ask students how these images and associations with the retail brands were generated by marketing.

Push Versus Pull: Convincing Retailers to Carry Brands As emphasized by Richard Lassalle‘s comments about Entube in the opening video, fit does not guarantee retailers will carry a product. Retail shelf space is valuable real estate from which they wish to earn maximum returns.

To convince retailers, producers have basically two choices: push strategies or pull strategies. Producers may implement some combination of the two.

Display figure ―Push and Pull Strategies Both Help Producers Reach Their Customers‖..

A push strategy is one in which the producer uses its sales force and perhaps promotional incentives to convince wholesalers and retailers to carry the producer‘s products. In other words, the producer attempts to push the product down the retail supply chain. Producers with strong sales forces and well-known and respected brands may favour push strategies. Most products on retailer shelves wind up there because of push strategies by producers.

A pull strategy is one in which a producer goes directly to the consumer, usually by advertising, and attempts to build demand for its brands. Consumers then go to retailers seeking the product. If the retailer does not carry it, then presumably at least some consumers will start asking for it, eventually convincing the retailer to stock it. Ask the class to identify examples of products they believe are using both strategies.

9.4 Concept Check Question 1: Explain the concept of retailer fit. What is the primary question that organizations ask in order to select which retailer outlets their products are placed in?

Answer 1: Retailer fit is a response to the very basic question that a producer might ask: ―Does my brand belong in a particular store?‖ This can be resolved by taking a few major things into account: retailer reach (ability of retailer to attract consumers for a producer‘s target market); retailer type (mass merchandiser [i.e., discount stores like Costco and Walmart], department stores [Hudson‘s Bay, Nordstrom], specialty stores [PetSmart, Marks]); and retailer image (does the image the store has cultivated align with the brand‘s or product‘s?).

Question 2: How might online marketing‘s growth affect the use of push and pull strategies in retail supply chains?

Answer 2: Online marketing and online retail in general may impact push and pull strategies in retail supply chains in that the push strategy can begin to utilize digital forms of advertising to drum up interest in products and pull strategy can more effectively generate consumer interest in a product by using newer methods of digital marketing, such as use of social media influencers, to target a desired consumer demographic.

Power and Conflict in Supply Chains LO 9.5 Understand the nature and effects of power and conflict in supply chains.

Efficient supply chains require that member companies work with each other even as they act individually in their own interests. The relationship between the retailer and producer can produce many disagreements and conflict. First, how to divide the difference between the cost of production and the retail selling price. Other related issues such as shelf visibility, volume requirements, delivery schedules, inventory financing, promotional support, return policies, and online sales may come into play. The question for marketing managers is how these conflicts get resolved.

Power in Supply Chains In supply chains, power is the factor that frequently determines how conflicts between members are settled. The supply chain member with the most power usually gets its way.

For our purposes, power is defined as one party‘s ability to get another member to do something that it would not have done otherwise. For example, Walmart is well known for using its massive size and economic power to muscle smaller producers into making price concessions. Ask the class to identify other sources of power such as brand recognition that draws customers to the store to see the product in the first place.

How Power is Exercised in Supply Chains Power relationships in supply chains develop around which resources possessed by supply chain members are most valuable and how some supply chain members wield their resources to get other members to cooperate.

Broadly speaking, companies wield their power in one of two ways. Companies can threaten another supply chain member, called coercive power whereas reward power, is where one supply chain member offers positive incentives to another member to gain compliance.

Ask the class to identify examples of each way of exercising power and to explain why a business might choose one way over the other.

Power in Today’s Retail Supply Chains

Up until about 50 years ago, producers were the most powerful supply chain members, in part because the producers had built powerful brands over time. Retailing was mostly populated by smaller, local retailers. Now however, retailers actually wield as much, or in many cases, more power than producers for two reasons. First, some retailers developed powerful brands of their own and gained larger customer bases. Second, technology and the capability to capture and analyze scanner data shifted power to retailers as they were able to use the data to gain insights into consumer tastes, priorities, and habits. Ask the class how much of their shopping is done at large regional or national retailers and how much with smaller local shops. Ask them why they think this is the case.

Conflict in Supply Chains There are a few major sources of conflict in a supply chain. First, supply chain members have different goals, the most important of which is to make as much profit as possible.

Profit for the retailer comes directly at the expense of the other supply chain members and vice versa. Second, sometimes supply chain members have differences about who should be responsible for what activities such as promotion for a specific product.

Finally, they may see the target market differently.

Managing Supply Chain Conflict As a general rule, research suggests that co-operative relationships in supply chains produce better outcomes for all parties. Managers can analyze supply chain conflict by asking two questions. The first is, ―How important is the substantive outcome of the disagreement?‖ In other words, does the disagreement pertain to matters that significantly affect sales, profits, growth, strategic objectives, or other important issues? The second is to ask, ―How important is the relationship with the other supply chain member?‖ Is that supplier needed, or can they be replaced?

Author Podcast 9.5 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Andrew Loos says that by circumventing often corrupt middlemen, Intelligentsia Coffee is providing value to: a. the government b. the shipper c. the producers d. the ad agency representing them 2. A direct trade model is one in which: a. the company buys from wholesalers b. the company buys from producers c. the company gives its shipper a percentage of product in return for shipping services

d. the producer ships straight to the retail chain 3. In the case of Intelligentsia, one reason for using a direct trade partnership is: a. to avoid the high tariffs charged by the local government b. to avoid paying U.S. tariffs on imported coffee c. to avoid corrupt officials in the local country d. to avoid international shipping costs 4. To leverage the partnership with coffee farmers, Intelligentsia: a. charges lower prices for its coffee b. has retail outlets in the country of origin of the coffee c. is able to provide a greater variety of coffee blends d. makes the story part of their brand message Discussion Questions 1. Do a Google search on ―direct from farm meat‖ and describe at least one of the companies you find.

2. Explain the traditional power position in a supply chain and discuss how it differs from Intelligentsia‘s model.

3. Explain the power shift that has occurred in supply chain dynamics in the last few years.

9. 5 Concept Check Question 1: What are some of the disadvantages of being a small producer in a supply chain with large, powerful retailers?

Answer 1: Retailers, over time, have been able to become powerful brands with the ability to gain insights into consumer behaviour, tastes, and priorities. They also have different goals than producers. This can all result in conflicting opinions on which part of the supply chain should shoulder the majority of cost for specific promotions and can mean the retailer has more information than ever before in regard to having opinions about a product‘s target market. This can contrast with what the producer thinks and can result in conflict.

Question 2: Discuss the two developments that brought power to retailers in modern supply chains. Are there any other developments that you think might occur? What developments may bring power back to producers?

Answer 2: Retailers, over time, have been able to become powerful brands with the ability to gain insights into consumer behaviour, tastes, and priorities. As online retailing continues to become more popular and more widely used, this power could shift back to producers—in some cases, we are starting to see this occur already. Certain brands are able to bypass retailers entirely which allows quality products to be offered at discounted prices, due to the ability to go directly to consumer. Further, as new media continues to change the way marketing is achieved, it is becoming easier and easier for producers‘ marketing departments to obtain information about their target market and directly access

that market (for example, ads bought on podcasts, targeted ads in social media, etc.).

Discussion in the classroom can be based around students‘ thoughts on retailer vs. producer power and in what other ways this power may shift.

Relationship Marketing in Supply Chains LO 9.6 Understand what relationship marketing is and how vertical marketing systems support relationship marketing.

The logic behind relationship marketing begins with the old adage that it is far cheaper to keep existing customers than to get new customers. New customers should be adding to current sales, not replacing lost sales. This is not only true for consumers, it‘s also equally true for conducting business in supply chains. Marketers are increasingly focused on relationship marketing, which we define as an orientation between seller and buyer that focuses on customer satisfaction, loyalty, and engagement built over the long term.

The mindset of relationship marketing is better understood when you compare it to the mindset of more traditional ways of doing business. Researchers conceive of different types of interactions between supply chain members as occurring along a continuum anchored at one end by ―discrete transactions‖ and at the other by ―relational exchange.‖ Discrete transactions occur when two parties conduct business on a one-time basis with no set expectations of future business. On the other hand, supply chain members engaging in relational exchange take a long-term view of their business interactions.

They not only expect to do business together in the future, they actively plan for it by exchanging information and making joint commitments based on trust. The idea is that long-term cooperation produces greater gains for both parties than the advantage that may be gained in a single transaction between parties guided by only a short-term orientation.

Research suggests that well managed long-term relationships between businesses can reduce both costs and uncertainty, which may enhance returns on the investments made in supply chains. First, trustworthy business partners reduce the need for constant oversight of the relationships. Second, long-term relationships reduce purchase costs.

Third, cooperative supply chain relationships often permit members to seize new business opportunities.

Relationship Marketing and Vertical Marketing Systems Display figure ―Traditional Supply Chains Versus Vertical Marketing Systems.‖ We introduce the term vertical marketing system to represent the culmination of effective relationship marketing in supply chains - almost as if all of the companies in the supply

chain act as a single organization. Vertical marketing systems (VMS) occur when producers, retailers, and wholesalers—when they‘re used—work together in highly cooperative relationships to create an overall unified group of organizations whose goal is satisfying consumers.

The most common type of VMS is the administered VMS in which supply chain members work closely and cooperatively with each other but have little in the way of formal agreements linking them. They choose to work closely with each other because doing so serves their best interests.

Sometimes companies formalize their supply chain relationships into contractual VMS where they sign contracts that specify the responsibilities and rewards of the relationships and bind each other to working closely together. One of the most common types of contractual VMS is the franchise agreement. Most franchises exist between a producer, called the franchisor, and a retailer, called the franchisee. One way to ensure close cooperation between supply chain members is for them to be part of the same company, referred to as the third VMS option, the corporate VMS where all levels of a supply chain fall under common ownership as with Apple and Benjamin Moore Paints retailers.

Ask the class to identify the advantages and disadvantages for each type of VMS and why these arrangements have developed using a specific example—say Starbucks.

9.6 Concept Check Question 1: Describe relationship marketing. What are some of the characteristics and benefits of relationship marketing?

Answer 1: Relationship marketing describes the orientation between buyer and seller that is based in customer satisfaction, loyalty, and engagement built over the long term. In some ways, it can be likened to a marriage in that both buyer and seller are committed to the relationship, both sides show levels of trust and cooperation, both sides are willing to invest in the relationship, and both sides may make sacrifices to achieve long term success.

Question 2: Should corporate VMS really be classified as supply chains?

Answer 2: Corporate VMS are certainly supply chains, in that there are different members of a chain that work together to produce, distribute, and sell a product in some way, even though all members of the supply chain may technically be the same (i.e., all parts are owned by the same company, despite possibly being under different names or umbrellas). While this type of supply chain is certainly different than other types of supply chains that have been discussed in this chapter, the structure and function exists for the same purpose that all general supply chains do: to produce, distribute, and sell a product.

Discussion Questions Question 1: Define supply chains and the various types of companies that commonly operate in supply chains.

Answer 1: A supply chain is the total series of companies, exchanges, and transactions that produce goods and make them physically/commercially available to consumers. The types of companies that are usually in supply chains include raw materials suppliers (who get materials for a product), component parts makers (who create the semi-finished goods/component parts for a product), the final producer/manufacturer, wholesaler, retailer, and finally consumer.

Question 2: Describe how a well-structured supply chain might provide economic value for supply chain members and consumers. Can you think of other ways that supply chains offer value to consumers?

Answer 2: A well-structured supply chain can save money for both consumer and supply chain members in that the number of contacts needed for a transaction can be minimized to the extent that considerable time, effort, and resources are saved. For retailers, a supply chain that includes a member that specializes in distribution and logistics allows the producer to hand off that part of the supply chain to a unit that is more well-equipped to handle those aspects, therefore cutting down either on the producers‘ need to acquire that specialization or in the possibility that performing those activities itself will result in errors or significantly more time and money spent doing those activities. Other ways that supply chains may offer value to consumers is in making obtaining a product very simple/easy—the more advanced our technology becomes, and the easier it is to transport products, the easier it is for consumers to access items they may once have been unable to come into contact with—for example, the prevalence of online retailers has made it immensely easier for home cooks to obtain exotic ingredients that they may have never been able to obtain prior to online retailing.

Question 3: Think of products you know that are distributed using an intensive distribution strategy. Do the same for selective distribution and exclusive distribution.

Answer 3: Answers will vary, but examples include: Intensive distribution Ziploc brand plasticware; Sony brand electronics accessories Selection distribution MAC brand cosmetics (available at department stores such as Nordstrom, as well as MAC retail outlets); Apple products (available at Apple stores and some electronic retailers, like Best Buy)

Exclusive distribution

SUPREME brand clothing/shoes/accessories/art; many luxury clothing brands; luxury beauty brands

Question 4: Distinguish between push and pull strategies for getting products into retail outlets.

Answer 4: A push strategy is one in which the producer uses its sales force and perhaps promotional incentives to convince wholesalers and retailers to carry a product whereas a pull strategy essentially convinces consumers to demand a product from a retailer or producer.

Question 5: Who often has the most power in modern retail channels? What developments brought this about?

Answer 5: Retailers, over time, have been able to become powerful brands with the ability to gain insights into consumer behaviour, tastes, and priorities. Two developments brought power to retailers in modern supply chains. First, over time, small, successful local retailers expanded first into regional and then later into national and global chains.

These retailers developed powerful brands of their own and gained larger customer bases.

Second, technology, and specifically the capability to capture and analyze scanner data, shifted power to retailers as they were able to use the data to gain insights into consumer tastes, priorities, and habits.

Question 6: Reflect on the role of collaboration and coordination within vertical marketing systems. How do the different types of VMS facilitate or hinder cooperations among channel members? Share a personal experience where the level of collaboration within a VMS influenced your perception of a brand, its products or services, and your overall satisfaction with the purchasing process.

Answer 6: The vertical marketing system is when producers, retailers, and wholesalers (when used) all work together in highly cooperative relationships to create an overall unified group of organizations with the same goal of satisfying consumers. The three main types are administered, contractual, and corporate. In an administered system collaboration relies on the dominant channel members that take the lead in coordinating activities and the other channel members‘ willingness to follow the lead. In a contractual system, collaboration is based on contractual agreements that outline the roles and responsibilities of channel members. Lastly, a corporate system has all channel members belong to the same organization which facilities cooperation, coordination, and communication. Student examples will vary based on their experience.

Application Questions Question 1: Look at Figure 9.5, which illustrates the economic value of retail supply chains. Does this figure hold true in the age of the internet? What economic value do online retailers provide compared to purchasing directly from producers?

Answer 1: While the types of retail supply chains are still the same in the age of the internet, it‘s interesting to note that the prevalence of these models may become more specific to certain products and brands. For example, the retailer-only indirect supply chain in increasingly becoming the model utilized by Amazon: more and more the wholesaler is being removed from the process (like a traditional model) and producers are starting to make products available solely through Amazon or their own retail outlet. The direct retail supply chain is the model that is used by Au Lit Fine and Apple. The value that exists in purchasing from retailers and not directly from the producer is in the ease of purchasing/finding the product and likely, the access to a reverse supply chain.

Question 2: How can direct supply chains create conflict in supply chains?

Answer 2: Direct supply chains can create conflict in supply chains in that they may create higher costs for the producers, and therefore consumers. In a direct supply chain, producers need to focus on the activity of logistics and distribution, which may be difficult or cumbersome, and therefore expensive, if they do not specialize in that process. Similarly, conflict can arise in that absolute control is maintained by the producer, however the initial cost and ongoing operational issues may be prohibitive, especially to smaller producers.

Question 3: Why do mass merchandisers such as discount stores create a retail experience that includes narrow aisles, bright lights, and basic store décor? Would a discount store that featured more upscale retail experiences for customers be well-received? Why or why not?

Answer 3: Discount stores‘ entire purpose is to sell large quantities of many types of items for a low cost. Having minimal décor and narrow aisles are in some ways a ―blank slate‖ making the way the store appears fit a wide variety of brands and items. A discount store with a more upscale retail experience could work, depending on location and the assortment of brands and products, however, the intended end result of these type of stores (low prices) may not be as easily achieved due to the cost in maintaining a more upscale retail experience as compared to bare bones décor and narrow aisles (that enable as much product as possible to be squeezed into a store). This type of style has been semi-utilized by some Real Canadian Superstores, especially in their women‘s‘ clothing department. About two years ago, a shift toward more ―boutique-like‖ arrangement of the women‘s‘ clothing section went into effect, with that section being organized in clusters of merchandise to give the effect of what a consumer might see at a higher end boutique store. This shift included more spread out racks of clothing with more space for

customers to move around within the sections. Stores looking to utilize this style would likely be unable to carry as many different products, based solely on space and size of the store, or would be looking at increased costs associated with leasing larger spaces to accommodate all of the products and wider aisles and more space.

Question 4: How have the internet and phenomena such as social media changed the attractiveness of push-versus-pull strategies? If most products on store shelves get there through push strategies, will marketing through social media and other digital marketing techniques change this?

Answer 4: Digital advertising and social media is absolutely changing the way that pushpull strategies are used. A very clear example of this impacting pull strategies is in the concept of the social media influencer. Brands ―gift‖ items to social media influencers who are either encouraged, or in some cases, contractually obligated, to post images and content about that product. These images are then seen by hundreds of thousands—in some cases, even millions—of potential consumers. Depending on the product and the number of influencers posting about a product, a feeling of exclusivity can be generated, increasing consumer demand for the product. Even in the case that exclusivity of a product or brand is not generated, the mere action of putting a product in front of potential millions of consumers can in many ways be more effective than the traditional push strategy that many retailers and producers have been working within.

Question 5: Pretend you are an online influencer in a specific area, e.g., video games, beauty, food, fashion, sports and fitness, travel, pet owner, technology and gadgets, automotive, etc. What kind of private-labelled, dropshipped products would you consider promoting? And how would you decide which suppliers to use and which products to offer?

Answer 5: Student answer will vary. Answers should include a thought process of how to choose suppliers and products, considering items such as sustainability, environmental impact, demand, etc.

Question 6: Think about retail giant Walmart and consumer products giant Procter & Gamble. Who has more power in the relationship between these two companies? Which one needs the other more?

Answer 6: Walmart likely has more power than almost any retailer and/or producer, however, it may be true that Walmart and Proctor & Gamble are about equal in terms of power, especially considering the amicable relationship they have in getting Proctor & Gamble products into Walmart and onto shelves for very low prices. It may very well be that Walmart has a bit of the upper hand in the relationship given their tremendous retailing power and the vendor program they have created in which producers essentially apply for placement on Walmart‘s shelves. In this way, Proctor & Gamble needs

Walmart more than Walmart needs Proctor & Gamble, especially because there are other goods in the same market as Proctor & Gamble that Walmart can sell.

Running Case This Saves Lives (TSL) Video Please note: Video Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-Choice Questions 1. Ryan says that the most important thing to do once TSL bars are on the shelf is: a. make sure they are priced appropriately b. make sure inventory levels are maintained c. get the brand story out quickly d. advertise about which retail outlets carry the brand 2. One form of marketing that TSL has used successfully is: a. box mailings b. online selling c. volume discounts d. bundling with related products 3. The failure of TSL bars to sell in Bristol Farms stores taught the team that: a. the victory is winning a new retail outlet b. the victory is getting off the shelf c. the victory is outselling a key competitor d. the victory is getting a target number of new outlets in a given period of time 4. They learned that to be successful, they needed to: a. look for the next customer as quickly as possible b. provide support once the product was on the shelf c. offer regular incentives to the retailer d. monitor inventory levels Discussion Questions 1. Describe box mailings. How effective do you think this form of marketing is? What kind of products are most likely to be successfully used in box mailings?

2. In addition to box mailings, what are other forms of direct marketing TSL used? Are there other forms of marketing that might be useful? What are they?

3. How might the TSL team have salvaged their relationship with Bristol Farms?

Running Case This Saves Lives (TSL) Questions Answers might include the following: 1. Are all the channel options consistent with TSL’s premium, high-end positioning?

As the narrative suggests, Target fits less well with TSL‘s premium, high-end positioning, since it is more of a discount-price store with good quality items. However, note that this will in part be a perspective based on the local market with which students are familiar. Target seems more upscale than Walmart or even discount groceries. On the other hand, students who shop at Whole Foods or similar stores will have a different perspective. Instructors should point this out to the students to provide background for the remaining discussion.

2. What role does Target play in TSL’s place strategy?

Target provides the opportunity for high volume of sales. It could also function as a gateway for additional sales outside Target if someone tries them from Target and then sees them in a Starbucks for example. Note in some markets Target has a Starbucks inside the Target. Will TSL be available in individual bars in the Starbucks inside the Target for $2.99 each, but on the Target shelf a few hundred feet away for a box of 4 bars for $4.99? This is a good place to revisit targeting and positioning in this decision context for TSL. 3. Could TSL be successful without Target? Why or why not?

TSL could certainly increase volume of sales by expanding the number of retail outlets of Starbucks, Whole Foods, and similar brands in which it is sold. While it is tempting to expand quickly—and there may be investor pressure to do so—the team needs to continue to consider the impact on their brand image of the retailers who offer their bars as well as their own limitations in the early years of the company. If retail support is critical to long term success in the retailer for TSL, then Target will be difficult for them since Target has so many stores that would make it impossible for TSL to provide extensive or even adequate in-store support. This is a good time to bring up the failed earlier attempt due to lack of retailer support.

4. Given the pros and cons of each channel option, should TSL consider pursuing additional channel options or not? Explain.

TSL might consider both expanding the number of Starbucks and Whole Foods stores where their bars are sold, as well as looking at companies that are similar to those—for example, Peet‘s Coffee and Trader Joe‘s grocery stores. If they can develop champions within these companies, those champions could provide the attention and service that help make them successful. However, note that purchasing in bigger chains will be dependent on sales. If the bars don‘t sell right away, the retailer will replace them with something that does. Modern retailing for large chains is about turn (volume sales in short time). Gaining champions within these bigger retailers will mean TSL will have to

convince someone within the retail purchasing group that TSL is a worthwhile risk, which won‘t be easy until they become a more prominent brand nationally.

5. Should TSL try to secure additional smaller boutique coffee chains like Timothy’s Worlds Coffee, or should it focus on further penetration in Starbucks? Explain.

The main benefit with approaching additional smaller chains is that their size makes it more manageable for TSL to offer adequate retailer support. In addition, smaller chains are more likely to take a chance with lesser known brands that seem to have some potential. On the other hand, the main problem with smaller, boutique coffee chains and other boutique retailers is that the potential for growth is limited, so TSL‘s support efforts might not pay off with the level of sales desired. At this point, it probably makes more sense for TSL to focus on further penetration of Starbucks until TSL has more resources to devote to servicing additional retail customers.

Application Exercise For this application exercise, you get to make place recommendations for TSL. Specifically, your task is to provide suggestions and justification for additional local place options for TSL that fit TSL’s marketing strategy. Do the following: 1. Make a list of local retailers that you think match TSL’s premium, high-end positioning. For this initial list, ignore the fact that TSL makes snack bars. Make sure you include some non-grocery retailers or locations in your list. For example, would gyms, health clubs, coffee shops, bakeries, health food stores, or markets be appropriate brand image matches?

2. Now, take your initial list and think about whether or not the retailer might consider TSL bars to be a good fit to sell in its location. Mark out those that would not be likely candidates to sell TSL bars.

3. From the remaining list of potential place outlets for TSL bar sales, rank order the outlets based on which you think would offer the best opportunity for TSL. 4. For the top option on your recommended list, list three reasons why it would be a good fit for TSL. Then list two possible reasons it might not consider selling TSL bars and how TSL might address these reasons. Now what advice would you give TSL? If you do this as a class activity, begin by having students brainstorm a list of potential local retailers who might sell TSL snack bars; encourage students to be all-inclusive at this stage. When you discuss the appropriateness of the retailers on the list, make sure students consider the fit with TSL‘s brand positioning, the fit with other retailers currently selling TSL bars, and the likely long-term benefit to TSL of each retailer. A class chart that summarizes the different options, strengths and weaknesses, fit and other points is helpful and gives the class a sense that the discussion and exercise had a planned and effective outcome. The same chart can be used as testing or quiz material by tying specific discussion points to chapter material.

Chapter 10 Managing Price and Customer Cost Perceptions The Price–Customer Cost Relationship LO 10.1 Define prices and the relationship between price and customer costs perceptions.

Influences on Price Setting Customer Perceptions Internal Costs Market Characteristics Competition LO 10.2 Describe the primary influences on price setting.

Pricing Strategy Pricing Strategies for New Products Pricing Strategies for Existing Products Pricing Strategies for Services LO 10.3 Describe the differences between pricing strategies for services and productsnew and existing-and identify pricing strategy options for both cases.

Price-Setting Steps Setting a Base Price Common Adjustments to the Base Price LO 10.4 List and describe the six steps used to set a price, and describe the most common adjustments to arrive at a final price.

Legal Issues Related to Price Decisions Protecting Companies from Negative Pricing Practices Protecting Customers from Negative Pricing Practices LO 10.5 List and describe the common legal issues related to pricing decisions.

Price Calculations Terms You Need to Know LO 10.6 Calculate and apply the key financial indicators used to make pricing decisions.

Chapter Introduction In this chapter, we focus on how to make price decisions with while considering how these decisions influence customer perceptions and behaviour. Pricing is one of the most difficult decisions in the marketing mix since it directly influences customer perceptions of value.

In LO 10.1, students are presented with a basic definition of price and the relationship between price and customer perceptions of cost to produce the product. The primary

influences on price setting are developed in LO 10.2. Pricing strategies for new products versus existing products is the focus of LO 10.3. LO 10.4 details the six steps used to set a price and the most common adjustments to arrive at a final price. LO 10.5 discusses several common legal issues related to pricing decisions. Finally, key financial indicators used to make pricing decisions are examined in LO 10.6.

The video interview with Greg Hague examines the challenges marketers face as they deal with customers‘ perceptions of price. Ask the class how they evaluate the value and price demanded for some products or services and if they think their thinking is always rational.

Industry Expert Video Greg Hague Please note: Video Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-choice Questions 1. Greg Hague says that there is no relation between cost and price and that people pay relative to: a. needs b. what is trending c. perceived value d. status 2. Hague says that price-setting is a three-step process: analyzing similar products/services; positioning your product/service to differentiate it from the competition; and: a. considering the distribution channels you will be using b. developing ways of building excitement c. considering the demographics of the target market d. considering the costs of promotion to be covered 3. Hague describes a launch strategy. It is: a. create a firestorm of excitement through a media blitz b. for real estate, have an open house with catered food c. use an open cart/close cart strategy d. announce the product/service well in advance of its being available 4. The goal of pricing is to charge less and earn more. To achieve this goal, according to Hague, a marketer must: a. create efficiencies to hold costs down b. increase the volume of items sold c. use price discounting d. find cheaper sources of raw materials

Discussion Questions

1. Describe the launch strategy that Hague outlines. Do you think this is a strategy that can be leveraged across a number of products/services?

2. What are the factors that increase value in the minds of buyers, according to Hague?

Are there other factors that he didn‘t mention?

3. Describe what Hague says about discounting. Do you agree with his assessment?

Why or why not?

The Price-Customer Cost Relationship LO 10.1 Define prices and the relationship between price and customer costs perceptions.

Prices influence customer decisions because price is a key component in the customer‘s perception of value of a product. Our discussion of the relationship between price and costs has two important takeaways. First, price is a measure of the relative value of an item for both the customer and the seller. Both must feel the price is acceptable relative to the value they assess for the item or there will not be an exchange. Second, the price is related to cost for both the buyer and seller. For the buyer, price is considered against the total perceived costs (both monetary and non- monetary) associated with purchasing and using the specific product. For the seller, price must include both the cost of making the product and a portion of all the other costs associated with being in business. Marketers must consider costs from both sides to set an acceptable price.

Display Figure 10.3 ―Gourmet Hamburgers can be very profitable in the food market‖.

Discuss the costs associated with the hamburgers and the perceived value customers have. Ask the class how the restaurant can increase the perceived value. Would the selection of pricy craft beers distract customers or fit with the overall impression?

Author Podcast 10.1 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. In addition to the amount on the price tag, one component of ―price‖ to the customer is: a. customer preference for one brand over another b. time spent researching the product and/or company c. stock outages d. colour, size, or flavour preferences (depending on the type of product) 2. To the customer, price is: a. a component of cost, but it is more than that b. often regarded as too high, given other factors c. the dollar amount that appears on the price tag d. something that can be negotiated 3. The marketer must understand: a. the role of the customer‘s brand preference b. the impact of geographical location on price sensitivity c. how millennials view the price of preferred products d. what the costs to the customer are, in addition to the price 4. Having to deal with an aggressive salesperson while considering a purchase can be considered:

a. an inevitable component of brick-and-mortar shopping b. a psychological cost c. a necessary annoyance to get key information or possible price reductions d. a social cost Discussion Questions 1. What are some of the added costs of shopping for a new iPhone, in addition to the price?

2. Why do marketers need to consider additional costs to their target customers when setting the price of a product?

3. If you were shopping for a new car, what factors in addition to the type, style, and price would you consider? Why?

10.1 Concept Check Question 1: What is the relationship between price and customer cost?

Answer 1: Price is the objective assessment of the value of a product, whereas customer cost considers perceived value—including nonmonetary costs—in the customer cost.

Question 2: Other than price, what are some other costs customers face when making a purchase?

Answer 2: Other things a customer might think about when making a purchase include how the item may fit into their life (e.g., if a shirt is a colour that does not coordinate with any of their customer‘s other clothing, or if it will coordinate with most of their wardrobe); when they may receive an item (e.g., if ordering online or having to place an order for a custom item). Ask the class what other types of nonmonetary things they consider when making a purchase.

Influences on Price Setting LO 10.2 Describe the primary influences on price setting.

Before we discuss how to set a specific price, it is helpful to identify the primary influences on the price setting decision. There are four primary factors that influence prices—customer perceptions or expectations, company costs, market characteristics, and competition.

Customer Perceptions When someone sees a $100 per month price for wireless, your first step is typically to compare the price with your expectations. You have what is referred to as a reference price, an expectation about the price of a given product. A reference price is a powerful influence on value perceptions because it is used as a point of comparison for the customer making purchase decisions.

Display Figure 10.5 ―Seeing the highest-priced jewellery first adjusts your reference price.‖ Ask the class how car salespeople attempt to change the reference price when selling cars in a showroom.

Discuss the ‗Ethical Dilemma‘ feature included in the textbook: You are moving for a new job or school and you need to find an apartment. From your research, you know apartments in the area you want range from a low of $600 per month to a high of $1800 per month. Since you don‘t know the new area, you have called a realtor to help you look for an apartment. When you meet the realtor at her office, she confirms that the least expensive apartments cost roughly $700 per month and the more desirable apartments are just under $2000. She then suggests you take a look at some apartments and says she has picked out three apartments to show you. The first apartment she takes you to is really nice and has more than you really wanted, but is also more expensive than you wanted to pay with a monthly rent of $1900. You tell her thank you, but you really wanted to be as far under $1000 a month as possible. She mentions it will be difficult to find anything acceptable under $1000, but you insist, so she drives you to another apartment that rents for $750. Compared to the first apartment, this apartment is way less appealing, has limited features, and you have a hard time picturing yourself living here. The lack of amenities makes you question the value. Seeing your disappointment and frustration, she offers to take you to the third apartment. This apartment has what you wanted, looks like a good compromise between the high end and low end apartments you have seen and feels somewhere you could live…not too much and not too little. She then reveals the price. ―This apartment is $1100 per month. I know it is not under $1000, but it does have what you wanted in an apartment and you have seen what your money gets you in this area. What do you think?‖ You decide to think about it and let her know your decision the following day.

While seemingly random, the realtor‘s process in showing you the apartments was purposeful and is evident in several personal selling contexts such as housing, cars, jewelry, and many others. Your reference price for an acceptable apartment was under

$1000. So she showed you something higher to move your reference price range threshold up some, showing you higher level features and what is possible if you spend more. Then, she shows you the lower level option at the bottom of your range so you can see how inferior it is compared to the higher end version you have already seen. Finally, she shows you something in between the two extremes that will be a ―compromise‖. Ask the class how likely they you to take the middle apartment. Is this an ethical approach by the realtor? How, as a customer, could you avoid a similar approach if you were in this situation?

Internal Costs Companies must consider both variable costs and fixed costs. Variable costs change with quantity sold and are generally tied to the product sold. A second type of internal cost that must be considered to make pricing decisions is fixed costs. Unlike variable costs, which vary with the quantity sold, fixed costs don‘t change based on sales. Ask the class to list the variable and fixed costs for running a concert at a 10,000 seat hall.

Market Characteristics Market characteristics also influence pricing decisions. First, price has more influence on demand in some markets than in others. Price sensitivity refers to the relative influence of price on demand. Price sensitivity can be seen in markets such as jewellery, ice cream, and vacation travel because in these markets small price changes can influence demand significantly; this is mainly because these purchases are considered discretionary by customers. When small price changes influence demand, the product has elastic demand.

If price changes (even large changes) have little or no impact on demand, the product has inelastic demand.

Another market characteristic that influences pricing is the stage in the product life cycle.

During the introduction stage, prices are higher; they decrease across the life cycle. Price competition will be especially intense in the maturity stage. Since costs typically decrease as the product moves through its life cycle, producers are typically able to lower prices.

Marketers have to consider the product life cycle and account for changes as the market progresses.

Competition A final influence on pricing considerations is competition. Customers often comparison shop, which requires a consideration of what competitors charge for the same or similar products.

Author Podcast 10.2

Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. An example of a variable cost is: a. the cost of ingredients b. salaries c. rent d. marketing costs 2. A customer‘s willingness to pay a premium price may be based in part on: a. the status of the brand b. the story of the brand or product c. the popularity of the brand d. the influence of one‘s peer group 3. When a marketer sets the price of a product, the competitors‘ prices are: a. the most important factor to consider b. one of the factors to consider c. not an important factor d. irrelevant 4. Setting prices is: a. both an art and a science b. a process that requires looking at both internal and external factors c. the job of product managers d. a key factor in the success of a product Discussion Questions 1. Outline the internal costs of producing a product. What are two variable costs?

2. What should marketers do to ensure customer acceptance if they charge a premium price for a product?

3. Explain the three factors that need to be considered when setting a price.

Mini Case 10 Question 1. Do you play online games? If so, what is the most you have paid for a game?

Answer 1. Student answers will vary.

Question 2. Should a game price be based primarily on what it costs to produce or what the customer is willing to pay (value they assign to it)?

Answer 2. Pricing must take both factors into account. Costs must be covered. If the price is too high, customers may not see the value in it.

Question 3. Is Steam better off pricing games in tiers, or should the games each have their own individual price? For example, should all games that would be priced between 20.00

and $30.00 be priced at $25.00, or should they each have their own price? (Hint: What is better for the customer? Steam? The game creator?)

Answer 3. There would be variability of the games in each tier, and from a customer perspective, the prices may not make sense as a result. Each product is ‗unique‘ therefore, from the game creator perspective and customer perspective, individual pricing is best.

Tiered pricing would be easier for Steam to manage. Finally, games could lose money if customers would be willing to pay a higher price than the middle of a tier, which negatively impacts the develop and Steam.

Question 4. Should Steam use an algorithm to determine what each customer is willing to pay for similar games and use that to set the price for a game to that customer, or should it charge the same to each customer for a specific game? (Hint: What is better for the customer? Steam? The game creator?)

Answer 4. Customers would not deem different prices to different customers for the same game as fair. It would also be difficult to set prices for new customers. Steam and the creator may make more profit off certain customers, but that would be offset by other customers.

Question 5. Is it ethical to charge different customers different prices for the same game?

(Hint: The airlines do it. Could this be done for games? Why or why not?)

Answer 5. Students could argue for either side of the ethical issue. Different prices based on certain characteristics such as students and seniors is fair. However, different prices impact the customer‘s views and is commonly seen as negative. Different pricing could be done for games, but this is likely not to be viewed as positive.

10.2 Concept Check Question 1: What are the four primary influences on price setting and how does each influence price decisions?

Answer 1: The four influences on price setting are:    

Customer perception—expectation of price according to a reference price; perception of a ―deal‖ (e.g., paying $3.99 for something vs. $4.00) Internal costs—the consideration of variable and fixed costs Market characteristics—the price sensitivity of a product and the life cycle of the product Competition—what competitors are charging for a similar or the same product

Question 2: What is the difference between variable and fixed costs, and how do they

influence price?

Answer 2: Variable costs are generally tied to the product that is being sold and will change with the quantity that is sold. Fixed costs do not change based on sales—rent, utilities, insurance, salaries, etc. A company will need to consider both types of costs when price-setting.

Question 3: What are the dangers of a price war for both competitors and customers?

Answer 3: Customers who switch back and forth based on the lowest price are not brand loyal, but rather are loyal to the cheapest price. Loyal customers—which are very desirable for a brand, as discussed earlier in the text—are very important to lasting success. If price wars (back and forth price spiral) continues, it could result in competitors losing money or even going out of business. Once that happens, remaining companies can actually increase costs again with less competition, which will result in customers then having to pay more than they were previously.

Pricing Strategy LO 10.3 Describe the differences between pricing strategies for services and products-new and existing-and identify pricing strategy options for both cases.

Pricing is strategic. Luxury brands communicate luxury through higher prices. Valueoriented brands must keep prices low relative to competitors to maintain a specific value proposition to customers. Pricing strategy will depend in part on whether the product is new to the market or is an existing product.

Pricing Strategies for New Products How would you go about setting the price for something customers have never seen and therefore have trouble valuing?

The key strategic decision for new product pricing is to decide whether to use a skimming price strategy or a penetration strategy. A skimming strategy is defined as setting an initially high price and using gradual, timed price drops to make as much profit as possible over time by maximizing how much you make from each sale. The key to a skimming strategy is to sell to as many customers as you can at a specific price and then lower the price slightly to sell as many as you can at the next lower price. This process is repeated until there is no one left to sell to at each price level.

For skimming to be effective: 1. The product must be perceived to be significantly more valuable than the product it is replacing.

2. The company must be certain that there will be an extended period after it introduces the new product without competition.

3. The company must be able to appropriately assess price thresholds to avoid decreasing the price too quickly or too steeply.

If any of these conditions are not met, then a more effective pricing strategy would be a penetration pricing strategy. Penetration pricing is defined as introducing a new product at a relatively low price with the intention of establishing a large market share before competitors can establish themselves. Discuss the example given in the chapter as to how ―Koodo Mobile‖ employed a penetration pricing strategy.

For penetration pricing to work: 1. The product should appeal to the mass market rather than just a niche or small market.

2. The company must have a cost structure to support the lower initial price.

3. The company should be dedicated and prepared to improve the product to maintain market share.

Pricing Strategy for Existing Products Pricing existing products is more straightforward than pricing new products because the manager has existing prices, and therefore value propositions, to use as a basis for setting price.

First, you must decide the basis for setting price. The key issue is whether the price will be set based on company costs (specifically variable costs) known as cost-based pricing, or whether the price will be set based on what the customer is willing to pay known as value-based pricing. The two options have different advantages and disadvantages.

Cost-based pricing has two advantages. First, if costs are accurately assessed, a costbased price covers variable costs, which means the company doesn‘t lose money. It is important to note that truly covering costs requires the managers to include a portion of fixed costs. Second, cost-based pricing is generally viewed as fair by customers because everyone pays the same price. A significant disadvantage of cost-based pricing is that there is no consideration for what customers are willing to pay.

Luxury products often use price to help increase perceived value for products using prestige pricing—setting a relatively high price to specifically enhance the brand image as higher value.

A second strategic decision for pricing existing products is to determine if prices will be static or dynamic. Static prices, also called fixed prices, do not fluctuate much, and are relatively stable over time. Static prices provide consistency and decrease the price shopping of customers. One static strategy is ―everyday low prices,‖ or EDLP, when a store offers consistently stable prices tied to small markups on items throughout the store.

In contrast, some prices fluctuate, sometimes dramatically, to influence purchase behaviour and profit given market conditions. For example, the airline industry uses dynamic pricing and adjusts prices constantly to match seat availability, competitive prices, and customer demand. A common form of dynamic pricing, especially in grocery stores, is referred to as ―high-low‖ pricing, in which the store initially offers items at higher prices and then reduces the prices significantly on these items when demand has waned. This pricing method is often used in tandem with loss-leader pricing, in which the retailer discounts certain items significantly to lure customers into the store, hoping those customers will buy other merchandise at higher margins.

A final strategic consideration for pricing existing products is to consider the price of one product as it relates to other products the company sells. Taking into consideration how the price of one product might influence the perception and price of another product is called price lining, and generally companies try to make the lines as distinct as possible to avoid customer confusion. Customers expect price to reflect value, so products with a

higher value should be priced higher than those with lower value.

Pricing Strategies for Services Pricing strategies for services can be complex and multifaceted. When pricing services, companies must consider demand for the service, the level of competition, and the cost of delivering the service. Common approaches include cost-plus pricing, value-based pricing and competition-based pricing. Common pricing strategies include hourly pricing, flat-rate pricing, value-based pricing, retainer-based pricing, tiered pricing, freemium pricing, subscription pricing, and performance-based pricing. Hourly pricing strategies charge customers a set price per hour and bases the total on the number of hours it takes to provide a service (typically used when services are difficult to accurately estimate in advance as they require a varying amount of time to complete such as consultants or freelancers working on specific projects). A flat-rate pricing strategy (also known as project-based pricing) determines a single price for a service, regardless of the amount of time or resources it takes to complete the service (commonly used by companies with a predictable scope of work such as repair services or cleaning services). Value-based pricing sets a price based on the value or benefits the customer receives from a service, rather than the cost of providing it (commonly used for unique, high-end, or highly differentiated products such as graphic design or web development). In retainer-based pricing companies charge a regular fixed fee for ongoing services or to reserve the service provider‘s time (typically used by consulting firms, marketing agencies, or legal practices and the fixed fee is usually paid monthly). Offering different levels of service at different pricing gives customers a choice based on their needs and budget and is known as tiered pricing or bundled pricing or volume pricing (usually used by companies who want to encourage customers to purchase larger quantities of their products or services such as gym or software companies). Freemium pricing offers a basic version of a service for free and additional features or services at an additional cost (commonly used by businesses that offer digital products or services). Subscription pricing is used when companies charge a regular fee (typically the fee is paid monthly or yearly) for continuous access to a service. Subscription pricing building loyalty and customer retention and is commonly used by businesses that offer digital products or services.

Lastly, performance-based pricing, also known as results-based pricing or outcomebased pricing, refers to companies setting the price based on how well a service meets certain performance goals or standards (commonly used for difficulty to price services that have a high degree of uncertainty or complexity). Discuss the advantages and disadvantages of the various pricing strategies.

Author Podcast 10.3

Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. In order to be successful at generating sales, a small company producing a premiumprice product needs to: a. hire a good marketing team b. use social media to spread the word about the product c. give in-store demos d. have a story that creates a value perception of high quality in the minds of buyers 2. The price of a product is not so much about the cost of producing it; it is about: a. the value perception b. the success of the marketing team in creating a great campaign c. the variable costs of items like hard-to-find ingredients d. the breadth of distribution channels the company uses 3. One element of the story Richard LaSalle tells about his Entube pastes is: a. their extraordinary taste b. their shelf life c. the high standards he sets for the ingredients d. the fact that they are chef-created 4. Jasmine Bina points out that an additional attraction for some customers of Entube products is: a. the sauces allow users to create gourmet meals with just a few steps b. sauces in tubes have an exotic association c. the ingredients last much longer in tubes d. the sauces are highly unusual Discussion Questions 1. What are the various elements a marketer should consider in creating the story of a product like TSL bars or Entube sauces?

2. If you were the marketer for Entube, what additional elements might you consider in creating the story of the product?

3. How do you respond to Dan Padgett‘s statement that price is not about the cost of producing a product; it‘s about the value perception of the buyer? Think of an example of a product you recently bought: what factors influenced your purchase of that particular product?

10.3 Concept Check Question 1: How do pricing strategy options differ between new and existing products, and what specific strategies can be used for each scenario?

Answer 1: Whereas pricing strategies for existing products tend to be straightforward because prices already exist, pricing new products must be done without actual responses from customers in a live market. For new products, producers employ either a skimming

strategy (price starts high and then decreases with gradual, timed price drops) or a penetration strategy (introducing the product at a low price to establish market share before competitors can). Strategies for existing products include determining whether to use cost-based pricing (set price based on company costs) or value-based pricing (set price based on what customer is willing to pay).

Question 2: What is the difference between skimming and penetration pricing, and what are the conditions for using each?

Answer 2: A skimming strategy is when the price starts high and then uses gradual, timed price drops over time by maximizing how much is made from each sale. For this to work, the product must be perceived to be significantly more valuable than the product it is replacing; the company must be certain that there will be an extended period after it introduces the new product without competition; and the company must be able to appropriately assess price thresholds to avoid decreasing the price too quickly or too steeply. A penetration strategy introduces the product at a low price to establish market share before competitors can. For this to be effective, the product should appeal to the mass market, rather than a niche or small market; the company must have a cost structure to support the lower initial price; and the company should be dedicated and prepared to improve the product to maintain market share.

Question 3: What is the difference between cost-based and value-based pricing strategies, and what are the advantages and disadvantages of each?

Answer 3: Cost-based value pricing considers what the company costs are when setting a price, whereas value-based pricing considers what the customer is willing to pay.

Strategy Cost-based

Value-based

Advantages If costs are accurately assessed, covers variable costs (i.e., the company doesn‘t lose money); generally viewed as fair by customers because everyone pays the same price. Some level of fixed costs should be considered to truly cover costs.

The company theoretically captures maximum profit possible; forces company to continually monitor and adjust to customer perceptions in the market.

Disadvantages No consideration for what customers are willing to pay, which could result in leaving money on the table (e.g., charging $35 for something that customers are willing to pay $45. for) Difficult to implement because difficult to get accurate information about true price customers are willing to pay.

Question 4: What are some considerations that service-based businesses should take into account when deciding on a pricing model or strategy?

Answer 4: Service-based businesses should consider customer demand (including the target market), the value its service offers to the customers, the level of competition, the cost of delivering the service (both variable and fixed costs), the flexibility of the pricing and the objectives (maximizing market share vs profit).

Price-Setting Steps LO 10.4 List and describe the six steps used to set a price, and describe the most common adjustments to arrive at a final price.

There are six steps in the price-setting process. Review the six steps with the class using Table 10.1.

Setting a Base Price 1. Set pricing objectives 2. Estimate demand and revenue 3. Determine cost, volume, and profit relationship for different price points 4. Analyze competitors‘ prices, offers, value propositions 5. Set the initial base price 6. Adjust to set final price Common Adjustments to the Base Price There are a number of different adjustments to price that marketers make. For example, marketers commonly adjust base prices using discounts that reduce the price a customer pays. There are a number of different price-discounting methods. One of the most common discounts is based on order size or quantity to encourage larger orders. Another common discounting tactic is to offer discounts to shift demand into less active periods.

This is especially true for services.

Review ―The Impact of Inflation on Prices‖ scenario included in the chapter. Ask students to consider the industries or products that may be more susceptible to inflationary pressures (answers will vary but might include utilities, food, construction, real estate, healthcare). Ask if they can identify any products or services that have experienced significant price increases due to inflation. How have these price changes

affected their purchasing behaviour and brand preferences within these industries or product categories?

Sellers sometimes offer rebates where the customer receives money back at some point after purchase. Rebates are more common on larger purchases, such as appliances, automobiles, and electronics, where prices are higher, and customers are more willing to put in some effort to get a reward. And finally, sellers sometimes offer financing terms that function as discounts on items like cars.

Price bundling is also a common price adjustment tool, in which multiple products or services are grouped together under a single price. Buy one, get one free, or buy one, get one at half price are examples of this pricing adjustment.

Some adjustments to price actually involve increasing price. Price premiums for specialty items or when there is high demand can encourage sellers to increase prices, especially for services.

Managers should calculate the potential profit implications before making price adjustments. Raise prices too high, and you lose customers. Lowering prices has financial consequences as well. In fact, many discounts actually lose money even though sales might increase. This is especially true in cases where discounts are provided to loyal customers who would otherwise purchase products at regular prices. Review with students the cereal scenario provided in the chapter.

Author Podcast 10.4A and 10.4B Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. The first step in setting the price for a product is: a. analyze competitors‘ prices b. estimate desired volume of sales c. evaluate costs to determine needed profit margin d. set pricing objectives 2. As a way to study pricing—both their own and their competitors‘—Frito-Lay: a. has a team of analysts studying weekly changes in prices b. has weekly calls with key retailers c. recreates grocery shelves in the board room to see what customers are seeing d. has salespeople report back on prices when they visit their clients 3. An adjustment to price may be made when: a. an initial trial of a product is launched b. changes of taste are triggered by seasonal changes (i.e., fall, summer) c. inventory levels get low

d. demand is high 4. An adjustment to price can also be triggered by: a. new styles being introduced b. the marketer realizes the market will bear a higher price c. profit margins are insufficient d. the company offers an incentive to a distributor or retailer Discussion Questions 1. What are some pricing objectives you might have as marketer for the new line of gourmet cookies? What strategies would be suggested by those objectives?

2. What is the goal of Frito-Lay in recreating grocery shelves in the board room? Do you think this is an effective strategy? Why or why not?

3. Dan Padgett mentions a distributor (the company in the middle of the supply chain) creating a price incentive to either the producer or a retailer. Where else in the supply chain could price incentives occur? Explain.

10.4 Concept Check Question 1: What are the six steps used to set a base price?

Answer 1: Step 1: Set pricing objectives.

Step 2: Estimate demand and revenue.

Step 3: Determine cost, volume, and profit relationships.

Step 4: Analyze competitors prices, offers, and value propositions.

Step 5: Set the initial base price.

Step 6: Adjust to set final price.

Question 2: What are the common adjustments to price and when would each be used?

Answer 2: Common adjustments to base price include discounts based on order size or quantity to encourage large orders; discounts offered to shift demand to less active periods (used especially in services, e.g., ―the early bird special‖; happy hour); rebates after purchase or special financing (used in large purchases like appliances, cars, etc., where prices are high and customers are willing to put in effort for reward); price bundling (customer buys multiple goods or services grouped under a single price, e.g., kitchen appliances); and lastly, adjustments that actually increase the price (when there is high demand for a product or service, e.g., airfares during major travel holidays, hotel rooms on weekends or ―in-season‖).

Legal Issues Related to Price Decisions LO 10.5 List and describe the common legal issues related to pricing decisions.

Making strategic, but legal price decisions requires an understanding of the basic legal issues related to price decisions. Legal issues in pricing fall into two general categories: issues related to price effects on other companies and issues related to price effects on customers.

Protecting Companies from Negative Pricing Practices Original laws that covered pricing issues were surprisingly not written to protect customers from unfair pricing tactics. Rather, the original intent of early legislation was to protect companies from each other, or more accurately, to protect small companies from larger companies. The federal Competition Bureau is an independent law enforcement agency that ensures Canadian businesses and consumers prosper in a competitive and innovative marketplace. One of the areas in the Competition Act that the Bureau monitors and enforces is forbidding the practice of predatory pricing. Predatory pricing is setting prices extremely low (typical rule is below variable cost) for an item specifically to run competitors out of business. Ask the class why they think predatory pricing was forbidden by law and what would happen if it was not.

Protecting Customers from Negative Pricing Practices Another area of the Competition Act prevents companies from engaging in price discrimination or charging different customers different prices for buying the same thing (at roughly the same time). The law also makes it illegal for a seller to offer two customers different services, such as warranties to different buyers for the same price and product. Ask the class why they think this was made law and what would happen if it was not.

Another illegal pricing practice that negatively affects customers is price-fixing. Pricefixing occurs when two or more competitors agree (either directly or indirectly) to set prices at a specific level. The most obvious case for this to be illegal occurs when sellers agree to set high prices in a market, which forces customers to pay higher prices than they normally would if the competitors were competing normally.

A final price-related practice that is illegal is the bait and switch. Bait and switch occurs when a company offers customers an attractive low price on an item, but then doesn‘t have the item available when the customer tries to buy, instead pushing a higher priced item that typically has a higher margin.

A growing area of concern for pricing issues is the use of comparison prices. Comparison

prices serve as a reference price for customers but might not be legal in all cases. A socalled MSRP (or Manufacturer‘s Suggested Retail Price) is often presented as a comparison point to make an advertised price seem like a better deal. If a car retailer shows customers the MSRP of $15,276 and offers the same vehicle for $14,224 during the model clearance event, the savings seem significant. The dealer might not ever have sold this specific model for the MSRP, but it clearly serves the purpose of giving customers a sense that they are getting a better value.

Author Podcast 10.5 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Predatory pricing is: a. illegal pricing designed to drive out competition b. illegal pricing that charges different people or groups different prices for the same product c. bait-and-switch pricing d. pricing designed to get consumers to buy in large quantities 2. Price discrimination is: a. illegal pricing designed to drive out competition b. illegal pricing that charges different people or groups different prices for the same product c. bait-and-switch pricing d. pricing designed to get consumers to buy in large quantities 3. Airlines charging different prices for tickets in the same class of seating and to the same destination is considered to be: a. predatory pricing b. price discrimination c. a legal form of pricing d. an illegal form of pricing 4. Coca-Cola experimented with a vending machine that tied price to the temperature outside. They abandoned the idea because: a. it was a form of predatory pricing and therefore illegal b. it was a form of price discrimination and therefore illegal c. it was too difficult to control d. it was unpopular with consumers

10.5 Concept Check

Question 1: What are the most common illegal pricing practices that affect competitors?

Answer 1: Predatory pricing is when a competitor sets a price for a product extremely low so that competitors selling the same or similar products cannot compete and ultimately are forced out of business.

Question 2: What are the most common illegal pricing practices that affect customers?

Answer 2: Price discrimination is when different customers are charged different prices for the same product. It is also illegal to offer different customers different services for the same price and product (e.g., different warranties for the same car at the same price).

Price-fixing is when two or more competitors agree to set prices at a specific level (i.e., two gas stations agree to set gas at a high market price, forcing customers to pay higher prices than they normally would in that market. Bait and switch is an illegal practice that occurs when a company offers customers a product with a great low price and then doesn‘t have that product available and pushes a more expensive product on them instead. It is also illegal if the advertised price was never an actual real price for a product.

Pricing Calculations LO 10.6 Calculate and apply the key financial indicators used to make pricing decisions.

In this section, we walk you through the essential financial calculations you need to be able to perform to make sound pricing decisions. After reviewing each of the terms below, display the corresponding calculation.

Terms You Need to Know: Fixed Costs: The sum of all costs required to produce the first unit of a product. Fixed costs do not vary as production decreases or increases. Common marketing fixed costs include rent, advertising, salaries, and promotion budgets.

Variable Costs: Costs that vary directly with the production of one additional unit.

Common marketing variable costs include manufacturing costs per unit (or purchase price per unit for resellers), sales promotion costs that can be attributed to each unit, and sales commissions.

Expected Unit Sales (or Demand Forecast): Number of units of the product projected to be sold over a specified period of time. Example: Market research allows us to forecast demand at 10,000 units for the next year.

Unit Price (Sale Price or Selling Price): The amount of money charged to the customer for each unit of a product or service.

Total Variable Costs: The product of expected unit sales and variable unit cost. (Expected Unit Sales × Unit Variable Cost).

Total Costs: The sum of all fixed costs and total variable costs given any level of production (or sales). (Fixed Costs + Total Variable Costs = Total Costs) Total Revenue: The product of expected unit sales and unit price, or the product of actual unit sales and unit price. (Expected Unit Sales × Unit Price = Total Revenue or Actual Unit Sales x Unit Price) Profit (or Loss): The monetary gain (or loss) resulting from revenues after subtracting all associated costs. [Total Revenue − Total Costs = Profit (or Loss)] Unit Contribution: How much the sale of a unit contributes to fixed costs or profits. (Unit Contribution = Price − Unit Variable Cost) Contribution Margin: Ratio that expresses how much the sale of a unit contributes to fixed costs or profits relative to the price. [Contribution Margin = (Unit price − Unit

Variable Cost) / Unit price] Markup: Ratio that expresses how much the sale of a unit contributes to fixed costs or profit relative to the variable cost per unit. [Markup = (Unit price − Unit Variable Cost) / Unit Variable Cost] Break-Even Volume: Total number of units that must be sold to produce a zero profit but cover all associated costs (no profit, no loss). [Break-even volume = Fixed Costs / (Unit price − Variable Unit Cost)] Break-Even Sales (in Dollars): Total sales dollars at a given price level needed to produce a zero profit but cover the associated costs. (Break-Even Sales = Fixed Costs / Contribution Margin) To gain a more thorough understanding of the important financial terms and calculations needed for appropriate pricing decisions, follow the textbook example that follows the definitions and formulas under ―Terms You Need to Know‖ in 10.6.

Discuss with students the ‗Applied Metrics‘ feature included in the chapter: Price decisions impact both the customer perception of value and also profitability for the seller. One of the most important tools a marketer has for making appropriate pricing decisions is break-even analysis. Break-even analysis tells a marketer how many units of a product required to sell to cover all costs. As outlined in the chapter, Break even = Fixed Costs / (Price per unit – Variable cost per unit).

Assume you have a part-time job while you are going to school as a photographer that takes pictures for events such as weddings, parties and other social events. Spring is your best time of the year and you want to really see if you can grow the business this year, particularly the wedding portion of your business. In the past, you have offered a wedding package that includes taking pictures of the wedding events, organizing the wedding photos into both a physical and digital album, and providing a digital copy of the wedding photos set to music. Your estimated cost incurred for a wedding package is $1000 and you charge customers $2500 for your wedding package. You normally spend $5000 on advertising and promotion which in the past has averaged 10 weddings per Spring. You are considering three pricing options for this Spring and need to decide what you should do. Option 1, keep the price the same. Option 2, drop the price $500. Option 3 raise the price $500.

Discuss with students how the break-even analysis can be used to determine the Breakeven point in units needed to cover the $5000 in fixed costs. Calculate the break-even point in units to determine how many weddings are needed in order to pay for the advertising if the price is kept the same, lowered by $500, or raised by $500. Ask students what they think should be done.

Advertising Fixed

Current Price $5,000

Lower by $500 $5,000

Raise by $500 $5,000

Costs Price Variable Cost Break Even in Units

$2,500 $1,000 3.33333333

$2,000 $1,000 5

$3,000 $1,000 2.5

Author Podcast 10.6 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Breakeven is: a. the point at which costs equal revenue b. the level at which the company is making an acceptable profit c. the level at which all fixed costs have been paid d. the level at which all variable costs have been paid 2. Marketing is a: a. fixed cost b. variable cost c. essential cost d. expendable cost 3. One difficulty of assessing costs is: a. the marketer may not know all the costs associated with producing the product b. the original budget may have been inaccurate c. some costs cannot be known until they are incurred d. the cost of raw materials can change without notice 4. A change in a relationship with a supplier can trigger: a. a change in the product mix b. a change in the cost of an item c. inability to produce a particular product d. inability to meet a production schedule Discussion Questions 1. Suppose you are the marketer for a line of gourmet cookies. List as many of the costs associated with creating, packaging, and shipping the products as possible. Which of the costs could change without much warning?

2. What are the advantages and disadvantages of maintaining stable relationships with suppliers?

3. What are the factors you will consider in setting the price for a box of your cookies?

10.6 Concept Check Question 1: What are the key financial indicators used to make pricing decisions, and how do you calculate each?

Answer 1:             

Fixed costs: sum of all costs needed to produce first unit of a product Variable costs: costs that vary directly with production of an additional unit Expected unit sales: number of units of product projected to be sold over a specified period of time Unit price: amount of money charged to customer for each unit Total variable cost: Expected Unit Sales × Unit Variable Cost Total cost: Fixed Costs + Total Variable Costs = Total Costs Total revenue: Expected Unit Sales × Unit Price = Total Revenue Profit: Total Revenue − Total Costs = Profit (or Loss) Unit contribution: Unit Contribution = Price − Unit Variable Cost Contribution margin: Contribution Margin = (Unit price − Unit Variable Cost) / Unit price Markup: Markup = (Unit price − Unit Variable Cost) / Unit Variable Cost] Break-even volume: Break-even volume = Fixed Costs / (Unit price − Variable Unit Cost) Break-even sales: Break-Even Sales = Fixed Costs / Contribution Margin

Question 2: What are the uses for the different financial indicators?

Answer 2: The different financial indicators assist companies in making pricing decisions. Information about the types of costs and suggested selling price(s) assist companies in determining whether costs are covered, what the number of break-even units are, and what impact different selling prices will have on contribution margin and total profit.

Application Questions Question 1: Describe at least three non-monetary costs you have when going to school.

Answer 1: Examples of nonmonetary costs involved in going to school include: emotional impact/mental health, social aspects, changes in physical health (sleep and diet), familial relationships, time/effort required preparing for school (homework, studying) or in getting to and from school (transportation). Discussion can be around each students‘ biggest nonmonetary cost in attending school.

Question 2: What is a reference price? How do reference prices differ for customers who buy an item frequently versus someone who does not buy an item very often?

Answer 2: A reference price is the expectation about the price of a certain product that is used as a point of comparison when making purchasing decisions. A customer who frequently purchases items—say, groceries—is likely to have a realistic reference price for many items and may not be shocked that 1 lb. of chicken breast is $6, whereas someone who rarely buys groceries might find themselves surprised at the price—either in expecting that it should be less or should be more.

Question 3: What is the purpose of a loss leader? Provide an example.

Answer 3: A loss leader is an item or service purposefully set at a reduced cost—often below market cost. It is used in a pricing adjustment strategy that is designed to stimulate the sale of other services or items. An example might be a home improvement contractor sells flooring at a super reduced cost, with the understanding that the customer will likely need to pay for the contractor to install the flooring and perhaps complete other home improvements. In this example, the flooring is the loss leader, and the installation and other services would be what the loss leader stimulated.

Question 4: How would a patent influence your decision to use a penetration or skimming pricing strategy for a new product? Explain.

Answer 4: If a company had a patent on a specific product, then penetrative pricing would be the most effective. With penetrative pricing, a big piece of the puzzle, in terms of the efficacy of the strategy, is that the company should be certain that there is an extended period of time after introducing a product in which there is no competition. For products that have patents on them—it‘s a guarantee that no competitor will be in the same market for a however long the duration of the patent is. In the example of a prescription drug for example, pricing could be done with the guarantee that no competitors would be in the market for around 10 years—depending on the specifics of the patent.

Question 5: What are the key potential problems with using cost-based pricing?

Answer 5: The major potential problem for cost-based pricing is that the company does not accurately assess its costs and prices too low and ends up losing money. The other major problem with cost-based pricing is that the potential exists for a company to leave money on the table, as this strategy does not take into account what a customer is willing to pay. If a company prices a product at $35, but customers are willing to pay $45 for that product, the company is essentially losing out on $10 per unit sold. Since cost-based pricing is not market-driven, it does not maximize profit.

Question 6: What is the difference between a price discount, a rebate, and a sales promotion? Provide an example of each.

Answer 6: Discounts can be based on order size or quantity to encourage large orders, or based on time sold, or some other variable; rebates are monetary rewards usually given after purchase or special financing and are often used in large purchases like appliances, cars, etc., where prices are high and customers are willing to put in effort for reward; sales promotions can be price bundling—when the customer buys multiple goods or services grouped under a single price, e.g., kitchen appliances—or can be in the form of special financing terms for large purchases.

Question 7: What is price bundling? Provide an example of price bundling that a grocery store might use.

Answer 7: Price bundling is also a common price adjustment tool, in which multiple products or services are grouped together under a single price. A grocery store might use price bundling for boxes of crackers—buy one, get one free—or cans of beans—buy 10 for the price of 7.

Question 8: If a product has an MSRP listed on the package, does it legally require the retailer to sell it at that price?

Answer 8: An MSRP does not legally require the seller to sell an item at that price—in most cases, it serves as a visible reference price or comparison point (especially for cars) and tends to work to the effect of altering a customer‘s perceived value (e.g., MSRP $15,470, a dealership has a price tag of $14,999). In some cases, it may actually be illegal to sell at the manufacturer‘s price; it could be seen as collusion.

Question 9: Use a product you are familiar with to provide an example of price lining.

Answer 9: Answers will vary amongst students, but all answers should ensure a clear understanding of price lining: taking into consideration how the price of one product might influence the price of another product. An example might be a car: a compact SUV cost is ~$25,500 and the same make, but a larger SUV may then make sense that it is

~$35,500. Another, less pricey, example could be a pair of designer high heel shoes goes for around $400, and the same designer, but for knee-high boots, prices the boots at $600.

Classroom discussion topics could be asking students if they have experienced a time where relatable products did not seem to be price-lined, and if there was a time that a product‘s price was very different than what they would have assumed it might be based on their reference prices.

Question 10: How can service-based businesses effectively implement and manage a pricing model or strategy to remain competitive and profitable? Provide some examples.

Answer 10: To remain competitive and profitable, companies will need to understand demand, customer needs and pricing expectations. Companies will need to consider which pricing strategy is best in their industry by understanding competitor‘s strategies, where they will fit in the market, and examining customer perceptions of the service.

Regular market research, evaluation of pricing and profits, consideration of promotions and discounts, and communication with customers will help ensure that the pricing strategy remains competitive and profitable. Student examples will vary.

Discussion Questions Question 1: Why do many prices end in 99? Does this seem to work or not?

Answer 1: It is believed that the perceived value of a cost that ends in 99, as opposed to 00, indicates a ―deal‖ to the customer. A customer is more likely to perceive that they are getting a bargain if a product is priced at $5.99, as opposed to $6.00. It certainly depends on the product and the customer, but it seems likely that this works, since so many products and brands—from breakfast cereal to houses—use this strategy.

Question 2: Can prestige pricing actually increase sales even though it usually means charging a higher price? Explain.

Answer 2: Prestige pricing is often used for luxury products to enhance the brand‘s image as high end and therefore high value. Depending on the product, brand, and customers, this can mean increased sales; a customer‘s perceived value is increased due to prestige pricing, and therefore more demand is created, which will result in more sales.

Question 3: Is value-based pricing fair to consumers? Why or why not?

Answer 3: Value-based pricing may feel fair to consumers, but ultimately is not as fair as the alternative: cost-based pricing. Value-based pricing is set depending on what customers are willing to pay for a product, not what it actually costs to produce the product. A product may only cost $15 to produce, but customers do not know that and are willing to pay up to $30. Fairness is all relative, however, so if a customer is willing to pay a certain price, it could be argued that paying the price that aligns with their perceived value is, in fact, fair.

Question 4: What are the pros and cons of different service-based pricing models and strategies, and how can businesses determine which approach is the most appropriate for their business and their target market?

Answer 4: Hourly-pricing is useful for businesses that provide services that are difficult to accurately estimate in advance as pricing allows for flexibility – the more hours spent, the more it costs the customer. However, it can make predicting the cost of the service hard for customers to estimate. Flat-rate pricing allows businesses to provide clear and predictable pricing to customers and eliminates the need to track time or resources, but it can be challenging for businesses to accurately estimate the cost of the work in advance, and it does not allow for flexibility if the scope of work changes. Retainer-based pricing provides a predictable source of income but may not accurately reflect the amount of work provided. Value-based pricing is a useful approach for businesses that want to differentiate themselves in the market and position their services as premium offerings; however, it can be challenging to implement as businesses need to accurately assess the value of its services. Tired pricing is useful for businesses that want to encourage customers to purchase larger quantities, however, it requires businesses to carefully consider the cost of providing the service at different levels of quantity. Freemium pricing allows businesses to build a customer base and generate revenue from customers who want the additional features or benefits, but it is challenging as companies must balance the need to generate revenue with the need to provide enough value in the free version to attract and retain users. Subscription pricing provides a predictable and recurring source of revenue and helps build a customer base, however, it requires careful management of customer relationships and the ability to continuously deliver value to customers to maintain their loyalty. Lastly, performance-based pricing provides an incentive to deliver high-quality services and can help align the interests of the business with those of the customer, however, it requires careful planning and agreement on the performance or outcome to be achieved and also requires the ability to accurately measure and track the results achieved.

Question 5: How does a good manager avoid a price war when a competitor drops price?

Answer 5: Good managers know how to make appropriate pricing decisions in such a way that likelihood of a price war is reduced. Good managers also know that by focusing customer attention on non-price benefits, the price is then a less important determinant when making buying decisions.

Question 6: How would you respond to the statement, ―Price discrimination should be avoided.‖? Explain.

Answer 6: Price discrimination should not be avoided, but it is illegal in some circumstances.

Question 7: Is a price war by competitors good for customers? Is it good for companies?

Explain.

Answer 7: A price war between competitors can ultimately hurt both customer and companies engaged in the price war. Loyal customers—which are very desirable for a brand, as discussed earlier in the text—are very important to lasting success. If price wars (back and forth price spiral) continues, it could result in competitors losing money or even going out of business. Once that happens, remaining companies can increase costs again with less competition, which will result in customers then having to pay more than they were previously.

Answer 8: If an appliance store advertises a specific model TV for half price on ―Black Friday,‖ but has sold out of them by time you get there and the salesperson recommends you buy a different model with a higher price, would this be considered bait and switch?

Why or why not?

Answer 8: As long as the specific TV that was advertised was actually available for purchase and was available to be purchased at the price advertised, this scenario is not a bait and switch. A bait and switch would only occur—legally—if the TV was never in stock or it was never available for the price advertised.

Running Case This Saves Lives (TSL) Video Please note: Video Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-Choice Questions 1. In order to launch TSL bars successfully, the company founders decided to accept: a. discounting as a necessary strategy b. the need for at least one big, national retailer from the outset c. a lower profit margin in the beginning d. higher production costs until they were able to increase volume 2. They discovered that price: a. would vary according to channel b. needed to be pegged to key competitors‘ prices c. varied by time of year d. needed to be the same for all flavours, regardless of the cost of ingredients in each flavour 3. The perceived value of TSL bars for customers is: a. this is a premium bar with premium ingredients b. this is a good-tasting bar that allows me to do good in the world c. the makers of this bar have a social conscience d. this bar is more attractively packaged than other bars and has more interesting flavours 4. To stick with a premium price, Ryan‘s‘ team: a. look to the future when they will likely be able to further increase the price of the bars b. believe in the product and the story c. continue to monitor the competition to make sure they remain at a premiumprice level d. will have to develop new, more exotic flavours with more expensive ingredients Discussion Questions 1. What were the key elements in the pricing decisions made for TSL bars?

2. If you were the marketer for TSL bars, how would you explain the different prices charged for the bar in the different channels?

3. In an environment where many companies have a socially responsible component as part of their mission and story, how effective long-term do you think the TSL story will be? What changes might have to be made for them to maintain their position as a premium-priced bar?

Running Case This Saves Lives (TSL) Questions Answers might include the following: 1. Does it make sense that TSL approached Target to begin with, given TSL’s premium product positioning? Why would TSL consider Target as a retail outlet?

This is a classic trade-off decision between image and volume goals. TSL wants to project a premium image, but also wants to sell a lot of bars, which suggests lower prices.

It does make sense that TSL would consider Target as a potential retail outlet. Target offers a high volume of sales and has a good reputation for quality, although not as a provider of premium, high-end products per se. Landing Target as a retail outlet and offering the lower price for their bars would satisfy a volume goal but goes against their premium image. The price disparity between the individual bars sold in Starbucks vs. the boxed bars in Target provides a good starting point for a discussion of pricing goals for TSL. Premium positioning suggests premium pricing. Boxes at discount don‘t suggest premium. This is an attempt to build volume because volume means visibility and cash flow that can be used for other purposes in building the brand. Volume also allows cheaper operating costs in most cases. Instructors who desire to expand the discussion on pricing goals can bring up examples such as Mercedes and BMW, luxury brands that pushed prices (attached to lower level vehicle introductions within the brand lines—i.e., 1 series and C class, to increase volume, but also hopefully lure customers into trying the brand with the idea that some of these customers would ―trade up‖ to higher level price/product combinations within the brand on subsequent purchases. It might be useful here to remind students that there are limits to moving up/down too far in a price line tier.

Honda, Nissan, Toyota all had to create new brands to introduce vehicles with luxury prices. Hyundai also just added the Genesis brand after claiming they would be able to extend the brand price higher but finding that they couldn‘t.

2. Do you think TSL would consider dropping the deal and forgoing a chance to end up on Target’s shelves? Would this be entirely bad?

TSL should at least consider the possibility of dropping the deal, especially since it wasn‘t a sure thing to begin with. They should consider the pros and cons of not having Target as a retail outlet. Pros include not risking their image as a premium product; cons include the difficulty of generating an equivalent volume of unit sales by expanding their reach with their current retail partners. Is their premium pricing to solidify high end product more important than their mission to sell as many bars and donate as many Plumpy Nut packets as possible? Which marketing goal wins out?

3. What information do you take from their analysis (as represented in the chart)?

The price of the boxed bars, with the exception of Kind and Goodnessknows, is $1 per bar. Target gets somewhere between $0.20 for a box of Kashi bars to $1.20 for Luna bars.

The two exceptions are just over $1 per bar. The bars are probably full-size (online variety packs of Kind bars are smaller—0.7 ounces).

4. Who is TSL’s primary competitor for Target shoppers?

Kind and Goodnessknows are probably the primary competitors since their price point is somewhat higher than that of the other bars. Customers often have reference price tiers that represent what they consider to be direct competitors.

5. Do you think TSL should create a new or distinct product to sell through Target, and what are the pros and cons of doing so?

Since TSL bars are available in a kid size, they could consider a pack of smaller bars to improve their net revenue. The main advantage of doing this is that it would allow them to sell their bars in Target stores. Disadvantages include that they would need to sell many more bars, even of the smaller size, to recoup the revenue lost due to the discounted price.

Creating a new product probably doesn‘t make sense at this time, considering the costs of new design and packaging for the product, as well as the impact on the production schedules of the bars sold at a higher price to other retail partners.

6. What price or package combination (number of bars) do you recommend for TSL given the scenario, and why?

Students will likely come up with a variety of answers for this problem. Suggest that they consider the number of bars TSL will need to sell just to make up for the lower price, any added costs that are the result of creating a new product with a new design, a new size, different ingredients that will need to be sourced, impact on production schedules overall.

Application Exercise Create a spreadsheet to complete the following tasks: 1. Assume Target sells a box of four TSL bars for $4.99 and has a 20% margin (meaning they keep 20% of the $4.99 per box). a. What is the price Target pays for each box to TSL? b. How much does Target make for each box sold (this is the unit contribution for Target)?

2. What is the markup for Target for each bar box? For each bar?

3. If it costs TSL $.55 for each bar in variable costs (all variable costs included), how much does TSL make per bar in unit contribution (remember, Unit Contribution = PriceVariable Cost/Unit). INTRUCTOR’S NOTE: A second calculation shows what TSL’s numbers look like if the approximately $.40 per PlumpyNut food packet donation is included in the per bar cost!

4. What is TSL’s contribution margin? What is TSL’s markup?

5. If TSL has $25,000 in fixed costs, how many boxes through Target do they need to sell to break even? (See formula in chapter material.)

1) Target Selling price per box (P) Target's margin (CM) Target Unit Contribution per box (UC) So, Target pays TSL per box

$4.99 20% $1.00 b. $3.99 a.

2) Target Markup per box is Target Markup in percentage per box number of bars in box So, Target's markup per bar

$1.00 Markup = UC/VC 25% 4 $0.25

3) TSL's selling price to Target TSL Cost per bar (VC per bar) Bars per box TSL variable cost per box (VC per box) So, TSL unit contribution (UC) per box is 4) TSL Contribution Margin is TSL Markup is 5) TSL Fixed Costs TSL UC per box is So, TSL Break Even Quantity of boxes is

Without donation $3.99 $0.55 4

With donation included ($.40 per bar) $3.99 $0.95 4

$2.20

$3.80

$1.79

$0.19

45% Contribution Margin = UC/P 81% Markup = UC/VC

$25,000 $1.79 13,951 BEQ = Fixed Cost / UC

Chapter 11 Using Group Promotion to Communicate with Customers Managing the Promotion Mix General Model of Communication Overview of the Promotion Mix Setting Promotion Objectives Working with Promotional Budgets

LO 11.1 Explain the general model of communication, the promotion mix, promotional objectives, and options for setting promotion budgets.

Overview of Group Promotion Advantages and Disadvantages of Group Promotion LO 11.2 Describe group promotion and list its advantages and disadvantages to marketers.

Advertising LO 11.3 Describe how advertising enhances group promotion. .

Sales Promotion Consumer Sales Promotion Trade Promotion LO 11.4 Describe how sales enhances group promotion Public Relations Influencing Public Relations and Publicity LO 11.5 Describe how public relations enhances group promotion.

Chapter Introduction In this chapter, we explore the traditional promotion tools marketers have used for years to communicate with customers. Keep in mind the need to coordinate messaging across a very rapidly changing landscape. In LO 11.1 we look at managing the promotional mix, setting objectives and budgets. Then, in LO 11.2, we examine common types of group promotion such as advertising.

Present the Industry Expert video to the class in which Ethan Zon, Senior Director of Strategy at Influence Marketing, highlights just how important personalized promotions have become, especially with the increasing need to directly connect with customers through digital marketing channels. Discuss with the class the role digital amplification and new media play in allowing marketers to connect in more meaningful and personalized ways with target audiences. Ask the class to think about how these new media options complement the traditional media marketers have used for decades.

Industry Expert Video, Megan Murray, founder and Creative Director for Presenting Partners Please note: Video questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple-choice questions are bolded.

Multiple-Choice Questions 1. Megan Murray works on ___________ for DoorDash.

a. public relations b. consumer promotions c. brand marketing d. marketing analysis 2. Which food delivery brad was not mentioned in the video? a. GrubHub b. Instacart c. UberEats d. ChowNow 3. DoorDash‘s Secret Menu is a _________. a. magazine b. website c. blog d. live tasting event 4. Secret Menu is meant to connect restaurants with ___________. a. other restaurants b. customers c. chefs d. food critics Discussion Questions 1. Why does digital marketing work so well?

2. How does a project such as Secret Menu build brand communities?

3. What are the benefits of brand communities?

Managing the Promotion Mix LO 11.1 Explain the general model of communication, the promotion mix, promotional objectives, and options for setting promotion budgets.

Present the definition: promotion is the set of marketing communication activities designed to inform and persuade important groups of people, primarily customers. Ask the class who, besides customers, might be important to a firm? For example, how does selling a product impact non-users.

General Model of Communication Review the general model of communication with the class. There are eight main elements: sender, receiver, message, encoding, medium, decoding, feedback, and noise.

The sender initiates the communication with a specific intention. The receiver is the opposite party the communication is targeting. The content of the communication (the message) is encoded (created in a specific format and design) by the sender. The delivery option of the message is known as the medium. The receiver decodes the message and interprets the message. A response to the communication by the receiver to

the sender is called feedback. Anything that interferes with the communication process is referred to as noise.

The model has several implications for marketing communications. First, both the sender and the receiver have goals for communication, though the goals may not be the same.

Next, the message and medium have to work together so the decisions should be made together. Additionally, feedback comes in different forms depending on the communication type. Lastly, noise is pervasive and can occur anywhere in the communication process. Discuss these implications and have the class provide examples.

ELM Model Persuasion involves changing customers‘ attitudes, generally to make those attitudes more positive for the brand. The Elaboration Likelihood Model (ELM) suggests that there are two ways to persuade someone, a central or direct route and a peripheral, indirect route. The central route involves logical arguments with product information, while the peripheral route instead represents an indirect approach with stories, music, humor and other emotional triggers to prompt generally positive reactions to the communication with the hope that the positive emotional feelings transfer to the brand.

Overview of the Promotion Mix Marketing managers use a variety of tools to promote referred to as the promotion mix.

Marketing managers look for ways to combine tools to develop synergies among them so that the mix works better than individual tools alone.

Capturing these synergies requires that managers coordinate the tools into an integrated marketing communications (IMC) strategy.

Display figure titled ―Integrated Marketing Communication‖ and review the structural details.

A properly planned and executed IMC strategy utilizes multiple channels of communication to project a single, unified, and compelling message about a brand.

Notice that the figure distinguishes between group and personalized promotion tools. All promotion tools are targeted, but some tools target groups, while others target individuals with personalized communication messages.

Setting Promotion Objectives Any time businesses spend money, they should have outcomes or objectives in mind for those expenditures. An example of a very successful promotional campaign is Nike‘s ―Just Do It‖ campaign (display Figure 11.3). Ask the class what the iconic swoosh and Nike message means to them.

Display and review Figure 11.4 The Hierarchy of Effects Model and Promotional Objectives.

The hierarchy of effects model is well known among communications theorists and a useful way to categorize promotion objectives. The model postulates that people must pass through two cognitive (Awareness and Knowledge) and two emotional or affective states (Liking and Preference) before taking an Action, such as visiting a store or making a purchase decision. Because promotion objectives can be stated using psychological or behavioural metrics, the hierarchy of effects provides some guidance on how these various objectives work together.

As shown in Figure 11.4, promotional objectives can fall into one of three categories.

Sales-related objectives will set sales targets during and after a promotional campaign and may be expressed in either absolute terms, such as unit or dollar sales, or relative terms, such as percent growth or market share. It‘s relatively easy to connect promotional tools, such as personal selling, directly to product sales - sales happen or they don't.

However, many factors may have contributed to the sale and adding to this difficulty is advertising‘s lagged effect, which means that advertising now may influence sales much later in time.

Marketers attempt to persuade consumers to engage in a variety of behaviours in addition to purchasing products called non-sales behavioural objectives such as store traffic counts, phone inquiries, contest entries, website hits, etc.

In contrast to sales-related and non-sales behavioural objectives, communication objectives focus on how well a promotional activity conveys information and meaning to a target market. Communication objectives are based on the assumption that conveying information and meaning will eventually produce sales. The four variables to the left of the box labelled ―Action‖ in Figure 11.4 show how the hierarchy of effects model frames communications objectives.

Illustrate the model by asking the class to relate how they passed through the steps to eventually become customers of some product.

Working with Promotional Budgets Budgets help marketing managers guide objective setting and direct resources where they‘re needed most. They also help marketing managers monitor the progress of promotional campaigns in order to see whether they‘re producing the kind of response needed given the objectives that guide them.

Display Table 11.1 Promotional Budget-Setting Methods and review four common methods for setting promotional budgets. Of those described, the most philosophically and practically justifiable is the objective and task method. Focus discussion on the reasons for using objective and task over other methods.

Applied Metrics Review the applied metrics example given in the chapter: Budgeting is often a difficult task in promotion in part because it is often difficult to tell which promotions will have the best return. Afterall, you have to decide on a budget amount and specific tools before you can tell how effective a given promotion might be. Given this difficulty, companies often rely on outside agencies to provide advice on which promotion tools to use to achieve specific promotion objectives with Cost per thousand (CPM) is calculated as a percentage as follows: Cost per thousand (CPM) = (Total cost of promotion ÷ number of impressions) x 1000.

Assume you are working with an outside company and have requested suggestions for a week of promotion to announce an event you will sponsor the following month. They have suggested three separate promotion options based on their experience for you to consider. Option 1 was a television ad that would cost $2,500 that would generate 25,000 impressions. Option 2 was an online ad that would also cost $2,500 but would generate 100,000 impressions. Option 3 was a radio ad that would cost $1,000 and generate 20,000 impressions. Calculate the cost per thousand for all three options.

Total Cost of Promotion Expected # of impressions Cost per thousand

Option 1 TV ad

Option 2 Online ad

Option 3 Radio ad

$2,500 25,000 $100

$2,500 100,000 $25

$1,000 20,000 $50

Ask students which option is the least expensive for reaching 1,000 customers. Which one is the most expensive? Discuss why one might use the most expensive option instead of a less expensive option.

Author Podcast 11.1 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. The strongest measure of any promotion is: a. sales b. number of views and likes the promotion gets c. profit margin d. results from surveys of users/purchasers 2. The goal of post-promotion is to secure: a. increase in orders from retailers b. better prices from suppliers c. test customer readiness for a new product

d. repeat sales 3. To measure the success of a promotion, marketers should assess results: a. once the initial promotion has ended—capture the number of sales b. from the moment of promotion launch c. after repeat sales have begun to be made d. from market surveys 4. The most effective type of promotion in reducing the number of touch points needed to convert a customer to a new product is: a. live interaction with the customer b. social media advertising that invites interaction by the customer c. email campaigns d. telephone surveys Discussion Questions 1. What is the goal of a brand in winning new customers? Explain your answer.

2. Why do you think live interaction decreases the number of touchpoints necessary to convert a customer to a new product?

3. In addition to sales, how else would you measure the success of a promotion?

11.1 Concept Check Question 1: Describe the hierarchy of effects and how it organizes the task of setting promotion objectives.

Answer 1: The hierarchy of effect model is a useful way to categorize promotion objectives and postulates that people must pass through two cognitive and two emotional states before taking an action (e.g. visiting a store, making a purchasing decision). First awareness occurs, then knowledge (together these represent the cognitive/‖thinking‖ parts), then liking and preference (affective/‖feeling‖ parts), and finally action is taken (a behavioural/doing part).

Question 2: What basic budgeting options do marketing managers commonly use?

Answer 2: Budget setting options for marketing managers include: Intuition and instinct (budget is based on gut instinct); Percentage of sales (budget set as a percentage of prior year sales/predicted year sales), Competitive response (set based on predictions of competitors‘ spending); and Objective and task (set based on objectives set for promotional activities for coming period).

Group Promotion

LO 11.2 Describe group promotion and list its advantages and disadvantages to marketers.

Traditional channels of promotion are not only still relevant, but they are also effective when they are well-executed parts of overall marketing and promotion strategies.

Advantages and Disadvantages of Group Promotion Discuss the advantages and disadvantages of group promotion with the class. Advantages include the ability to access a large number of customers simultaneously, increased market coverage, speed in reaching potential target customers, and a typically lower cost per exposure. Disadvantages include the amount of noise that is typically involved in group promotions, an increase in the amount of money wasted as high levels of noise increased the need for repeated messaging, the difficulty tracking and measuring the effectiveness of the advertising, and the limited messaging capability.

When to Use Group Promotion When companies have a large number of customers who are accessible via traditional group media and the buying situation is simple (benefits of product are easy to communicate), group promotion can be effective. Keep in mind that even if all of these conditions are met, companies still need to have enough money to spend to make group promotion effective, which can require significant promotion budgets, particularly in consumer markets.

11.2 Concept Check Question 1: Describe the advantages and disadvantages marketers face when using group promotions.

Answer 1: The advantages of group promotions include the ability to access a large number of customers simultaneously, increased market coverage, the speed in reaching potential target customers, and a typically lower cost per exposure. Disadvantages include the amount of noise that is typically involved in group promotions (customers are being bombarded with information and seldom focus full attention on a group promotion), an increase in the amount of money wasted as high levels of noise increased the need for repeated messaging, the difficulty tracking and measuring the effectiveness of the advertising, and the limited messaging capability. Limited messaging capability results both from the difficulty in tailoring the needs of the communication to individual customers and the difficulty in communicating complex messages.

Question 2: Explain when marketers should use group promotion.

Answer 2: Companies should use group promotion when they have a large number of customers that are not centrally located. Secondly, group promotion is more effective if the messaging is simple – the advantages of the product or service are easy to communicate. Lastly, if customers are accessible via traditional group media such as television, radio, or outdoor advertising, then group promotion can be effective.

LO 11.3 Describe how advertising enhances group promotion.

Advertising Advertising is paid, non-personal communication by a sponsor to an audience. This implies a one-way flow of information from seller to buyer.

Commonly Used Types of Advertising We will describe two broad categories of advertising and the different types of advertising within each category. Ask the class to identify advertising they have seen that may fit these descriptions.

The first broad category is called institutional advertising, which is used to build the general reputation of the organization and create goodwill toward the company and its brands.

There are two types of institutional advertising. Corporate image advertising communicates an overall positive image for the firm in a broad and nonspecific sense, while advocacy advertising expresses a firm‘s involvement with some social issue or charity.

The second broad advertising category, product advertising, promotes the advertiser‘s specific products. Marketers spend the bulk of their advertising budget on product advertising. Based on the stage of the product in the product life cycle, product advertising can be further classified.

Pioneering advertising stimulates primary demand and occurs early in the PLC, when product categories are new, and the goal of the advertising is to promote the category rather than a specific brand.

Competitive advertising focuses on selective demand. When several brands compete in a product market, advertising helps brands stand out from the crowd. Competitive advertising for one brand need not mention competitors by name, but some do with what is referred to as comparative advertising.

Direct response advertising promotes directly to customers without involving the retailer by making customers an offer, providing supporting product information, and providing a method of response so customers can take the company up on the offer and

complete an exchange. Customers can respond directly to the company via web address, email, or phone, and companies can track results to determine effectiveness.

The most common, and also the most controversial, method of direct response advertising is the infomercial. Infomercials are extended ads that involve dramatic product demonstrations with a response method.

Discuss the Ethical Dilemma feature included in the chapter: A firm that makes kid toys has developed a marketing campaign that has three primary tactics: 1. Advertising the toys during targeted shows on networks kids watch most, 2. Using in game promotion of the toys within a couple of the most commonly played online games, and 3. Promoting the toys through a few of the top influencers kids follow most.

Ask the students which of these tactics is ethical and which products they think could be reasonably promoted directly to kids.

Creativity in Advertising When most people think of advertising, they think of creativity. Here are some common guidelines for producing advertisements: 1. Attention getting. Advertising creative should visually and verbally stand out in its environments. This is the price of admission for effective creative.

2. Stimulating relevance. This means that good creative speeds up the process of awareness and acceptance of the advertised brand. Ultimately, it should speed up affirmative purchase decisions.

3. Detailed. Creative ideas should be detailed enough to be tested in advance and then executed into actual advertising. Vague ideas do not qualify as effective creative.

4. Capable of multiple executions. A good creative idea should allow multiple ad executions, often serving as the basis for advertising campaigns for several years.

For example: ―The Most Interesting Man in the World‖ for Dos Equis beer.

Advertisers must decide on the form that creative ideas take, referred to as execution style. Review the list of common execution styles below and ask the class to identify an example they associate with each style.   

Straight sell is a straightforward, factual presentation of information in a generally unadorned fashion.

Demonstrations show the product in use to emphasize its features or performance.

Testimonials feature ―regular‖ people who have actually used a product and praise it for its benefits.

   

Celebrity endorsements use a famous person to lend their name, image, and reputation to selling the product.

Slice-of-life commercials use a mini dramatization portraying a ―real-life‖ situation involving a problem the product might solve.

Fantasy advertisements evoke emotions by using unusual and compelling images to encourage TV viewers to associate the visual impressions with the product.

Personality or symbol advertising creates a character to sell the product.

Media Strategy in Advertising Once a creative strategy has been devised, marketers must also consider where and when the advertising will appear. Doing so requires that advertisers confront the basic media planning problem: how to maximize exposure of the advertising message to the target audience while minimizing waste coverage.

Waste coverage occurs when people outside of the target audience are exposed to advertising messages not intended for them or when the target audience itself is overexposed or underexposed to the advertising message.

Reach is the percentage of a target audience that sees an advertisement at least once during a given period of time (usually a week).

Frequency is the average number of times members of the target audience see the advertisement.

Display Figure 11.9 ―The Relationship Between Reach and Frequency‖ and show that reach and frequency are inversely related to one another. That is, as one goes up, the other goes down. Thus, within a limited budget, a media planner may spend to reach much of the target audience a few times or a few of the target audience members many times, but not both goals at the same time. Ask the class to describe how they would optimize the advertising effort for a particular consumer product aimed at them.

Author Podcast 11.3 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. To meet the company‘s objectives for a product, an ad campaign must have: a. consistency and relevancy b. clear message regarding the story of the product/brand c. broad reach in terms of media used in the campaign d. relevancy and timeliness

2. The ad campaign for the vitamin company that Andrew Loos mentions started with: a. demos to retailers who would be carrying the brand b. in-store demos for customers c. a sample and coupon promotion d. a TV ad campaign 3. In addition to providing a discounted price, a coupon is a way of: a. generating interest among retailers b. tracking customer behaviour c. ensuing a second sale d. a way of ensuring brand loyalty 4. The role of public relations is to: a. improve the visibility of a company b. improve the reputation of a company c. change customer behaviour d. publicize a change in message about the product or brand Discussion Questions 1. What does Andrew Loos mean when he says that an ad campaign should be consistent? Consistent in what ways?

2. What are some negatives of hiring a public relations firm, according to Jasmine Bina?

3. What are some of the upsides of public relations efforts?

11.3 Concept Check Question 1: Compare and contrast the various types of product advertising and explain how they relate to stages of the product life cycle.

Answer 1: Types of product advertising are as follows: Type Description Institutional

Builds general reputation or organization and creates goodwill to company and brands

Corporate image

Type of institutional advertising; communicates overall positive image of firm based in broad, nonspecific sense Type of institutional advertising; expresses firm‘s involvement with a social issue or charity

Advocacy

Relation to Product Life Cycle Can occur at beginning of product life cycle to drum up interest in company (but can be useful throughout product life cycle)

Product

Promotes advertisers‘ specific products

Pioneering

Type of product advertising; used when goal of advertising is to promote the product category rather than specific brand Type of product advertising; focuses on selective demand when several brands compete in a product market Used to promote directly to customers without involving retailer

Competitive/comparative

Direct response

Infomercial

Use of specific types dependent on product life cycle stage Occurs early in product life cycle when product categories are new

Occurs at point in product life cycle when it is appropriate to differentiate brands from one another Can occur at any point in product life cycle due to extended nature of ad— provides enough information to customer about product, brand, etc., to not need to rely on previous reference points or customer knowledge of market

Type of direct response advertising; extended ads that dramatize product demonstrations and are useful for products that require more involved purchasing decisions

Class discussion can revolve around students‘ examples of each type of advertising.

Question 2: Describe qualities that make advertisements more creative.

Answer 2: Some common guidelines that make advertisements more creative are:  Attention getting. Advertising creative should visually and verbally stand out in its environments. This is the price of admission for effective creative.  Stimulating relevance. This means that good creative speeds up the process of awareness and acceptance of the advertised brand. Ultimately, it should speed up affirmative purchase decisions.

 

Detailed. Creative ideas should be detailed enough to be tested in advance and then executed into actual advertising. Vague ideas do not qualify as effective creative.

Capable of multiple executions. A good creative idea should allow multiple ad executions, often serving as the basis for advertising campaigns for several years.

Question 3: Describe the common execution styles used in advertising.

Answer 3: Common execution styles used in advertising include: 









 

straight sell is a straightforward, factual presentation of information in a generally unadorned fashion. Straight-sell approaches can be inexpensive to produce and can have the advantage of clear brand messaging. However, they may struggle to get and keep audience attention.

Demonstrations show the product in use to emphasize its features or performance. This execution style is particularly well suited to commercials where video is used, especially television.

Testimonials feature ―regular‖ people who have actually used a product and praise it for its benefits. Testimonials can be highly effective when perceived to be sincere. Advertising regulations require that when testimonials are used, the people giving the testimonials must be actual users of the products.

Celebrity endorsements use a famous person who lends their name, image, and reputation to selling the product. The ordinary image of the celebrity should fit the product‘s brand positioning and make sense to customers. It should also be considered that celebrities occasionally behave in ways that generate bad press, which may be transferred to the brand‘s reputation.

Slice-of-life commercials use a mini dramatization portraying a ―real-life‖ situation involving a problem the product might solve. The commercials use actors and dialogue just as a movie or television drama would, but in a brief ―problem-solution‖ format.

Fantasy advertisements evoke emotions by using unusual and compelling images to encourage TV viewers to associate the visual impressions with the product.

Personality or symbol advertising creates a character to sell the product. The character may be a cartoon character or a real actor portraying the character.

Question 4: Describe the basic media planning problem.

Answer 4: The basic media planning problem is how to maximize exposure of the advertising message to the target audience while minimizing waste coverage. Waste coverage occurs when people outside the target audience are exposed to advertising messages not intended for them or when the target audience itself is overexposed or underexposed to the advertising message. While the basic media planning problem can never be perfectly solved, it provides a goal for media planners as they attempt to balance the two components of media planning: reach and frequency. Reach is the percentage of a target audience that sees an advertisement at least once during a given period of time,

while frequency is the average number of times members of the target audience see the advertisement. Reach and frequency are inversely related to one another—that is, as one goes up, the other goes down.

LO 11.4 Describe how sales enhances group promotion.

Sales Promotion Sales promotions are designed to persuade customers to make a purchase or to speed their decision processes. Sales promotion techniques are often integrated into advertising or other promotional activities. Marketers target end customers and supply chain members with sales promotion.

Consumer Sales Promotion Marketers use consumer sales promotion to add incentives or inducements for consumers to buy products sooner rather than later.

Broad Goals for Consumer Sales Promotion Although consumer sales promotion may encompass many specific goals, the goals all fall into one of two basic categories. Consumer sales promotion may be intended to encourage quick transactions between buyers and sellers, or it may attempt to build the long-term image of a brand. Most consumer sales promotions are designed to build quick sales by encouraging customers to act now.

Tools of Consumer Sales Promotion Marketers use seven primary tools for consumer sales promotion: After reviewing each tool, ask the class to evaluate them with respect to their effectiveness. Then ask for more specific examples that illustrate each tool in use.  

  

Coupons. Coupons are simply small certificates giving the bearer a price reduction or other form of value with purchase of a given brand.

Premiums are free or very inexpensive merchandise offered as an extra incentive to purchase. Free premiums are, as the name implies, small gifts sent to consumers who provide proof of purchase, or small prizes offered inside packages such as toys inside snack or cereal boxes.

Bonus packs offer an extra amount of a product at the ―regular‖ price by providing slightly larger containers (e.g., ―10% more, free!‖) Samples. When marketers sample, they give consumers a small quantity of product at no charge in an effort to induce trial.

Contests and sweepstakes are promotions in which consumers compete for prizes on the basis of some skill or ability. Price-off deals are simply short-term price



reductions on products, offered by retailers and producers. Generally speaking, price-off deals are the most common form of sales promotion in part because they are so easily implemented, particularly at the retail level.

Sponsorships are money or other resources companies commit in exchange for promotional benefits. Sponsorships are often tied to specific events.

Trade Promotion In addition to targeting groups of customers with sales promotion, marketers also target members of the supply chain. Trade promotion encompasses a collection of incentives marketers use to induce business prospects or customers to buy now or to buy more.

Review the following list of the most common trade promotion tools: •

• •

•

Trade allowances are a broad category of discounts and other incentives offered to retailers by wholesalers and producers or to wholesalers by producers. Because trade allowances come in so many varieties, they are summarized in Table 11.2.

Display and review the items in Table 11.2.

Training programs: Many manufacturers agree to pay for training retailer sales staffs on how to operate and sell the manufacturers‘ products.

Sales contests and incentives: Producers frequently offer incentives or sponsor sales competitions for the sales forces of retailers to encourage the retail salespeople to emphasize the producer‘s products to consumers.

Trade shows. Trade shows bring marketers and potential organizational customers together in one location over several days.

Ask the class which tool would likely be best for specific products or services, such as computer software.

11.4 Concept Check Question 1: Describe the tools of consumer sales promotion and give an example for each.

Answer 1: Consumer sales promotions adds incentives or inducements to encourage consumers to buy sooner rather than later. Tools include: coupons, premiums (small gifts sent to consumers with proof of purchase), bonus packs (extra amount of product at ―regular‖ price, e.g., shampoo with 50% more product), sampling (companies give small amount of product at no cost, used in health and beauty products often), contests/sweepstakes (generate excitement about a product, e.g., McDonald‘s Monopoly), and price-off deals (short term price reductions).

Question 2: Describe the tools of trade promotion and give an example for each.

Answer 2: Trade promotions target members of the supply chain outside of consumers and are used to induced business prospects or customers to buy now or buy more. Tools

include: trade allowances (discounts and other incentives offered to retailers by wholesalers and producers or to wholesales by producers), training programs (often offered at exotic locations, and having salespeople travel to receive training at the producer‘s expense, which results in a relaxed, excited, motivated, knowledgeable sales force), sales contests/incentives (offered to sales force to encourage retail salespeople to emphasize a producer‘s products; e.g., Maytag offering a bonus to appliance store salespeople for each Maytag appliance sold), and trade shows (bring marketers and potential organizational customers together in one place over a few days, e.g., International Builders‘ Show that has over 1600 exhibits about products, technologies, best practices, and innovations for builders and renovators).

LO 11.5 Describe how public relations enhances group promotion.

Public Relations Public relations is defined as ―the management function which evaluates public attitudes, identifies the policies and procedures of an organization with the public interest, and executes a program of action (and communication) to earn public understanding and acceptance.‖ This definition has some important facets. First, public relations is a process that begins with determining stakeholder attitudes and then seeks to bring understanding between the organization and those stakeholders. Second, the definition implies that public relations is not just ―crisis management,‖ but is continuous and ongoing. Finally, the definition implies that public relations extend beyond a firm‘s desire to sell goods and services to include its general life as a citizen in the countries and communities in which it operates.

Ask the class to identify some recent public relations examples in the news and discuss how they were managed.

Marketing public relations is the portion of the firm's public relations that directly assists marketing.

Tools of Public Relations in Marketing The most commonly employed tools of public relations serve general public relations purposes as well as purposes specifically for marketing public relations. Review this list of public relations tools with the class and ask if they have seen a recent example of each. 

 

Press releases. Press releases, the primary public relations tool, announce new product developments or rollouts, advertising campaigns, price changes, research breakthroughs, and other marketing initiatives.

Media kits. The media kit is basically an enhanced press release.

Digital media content. Digital media, including company websites and social media sites, provide excellent platforms for making press releases and media kits

  

easily available to stakeholder groups and the news media.

Press conferences. For particularly important initiatives or information, company executives may hold a press conference.

Institutional advertising. Corporate image advertising and advocacy advertising were covered earlier in the section on advertising.

Special events. Organizations very frequently host or sponsor a variety of events and activities that contribute to the quality of life in the communities in which the organizations operate or sell their products.

Company Field Trip Video Maple Leaf Sports & Entertainment Please note: Video Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Why is marketing important to MLSE? a. to grow brand awareness b. to survive as a business c. to promote its four sports teams d. to remain competitive in the entertainment industry 2. What is one marketing challenge MLSE faces? a. the audience stays the same and marketing must be innovative b. marketing continues to change c. there are many products to be marketed d. non-profit marketing is not reliable 3. What measure of effectiveness does MLSE use? a. brand loyalty b. satisfaction c. ticket sales d. repeat purchases 4. What advice was given for marketing students? a. have many tools you can use b. specialize in the industry you want to excel in c. be a brand loyal customer to the company you want to work for d. gain as much digital knowledge as possible Discussion Questions 1. Why is marketing so important at MLSE given the popularity of sports?

2. How does MLSE engage the community?

3. How does MLSE evaluate their success?

11.5 Concept Check Question 1: Why is public relations of great importance to marketers?

Answer 1: Marketing public relations directly assists marketing and can assist the firm‘s overall marketing effort in some important ways: help companies generating excitement about marketing activities (i.e., creating a ―buzz‖ about a product or innovation, and prepare customers for ad campaign that will follow); help customers derive maximum value from brands (e.g., help lines, websites that bring customers into contact with important info about use of products); and build brand loyalty by strengthening and expanding relationships that customers have with brands they buy.

Question 2: Describe tools commonly used in public relations.

Answer 2: Common tools used in public relations include the following:  Press releases. Press releases, the primary public relations tool, announce new product developments or rollouts, advertising campaigns, price changes, research breakthroughs, and other marketing initiatives.  Media kits. The media kit is basically an enhanced press release.  Digital media content. Digital media, including company websites and social media sites, provide excellent platforms for making press releases and media kits easily available to stakeholder groups and the news media.  Press conferences. For particularly important initiatives or information, company executives may hold a press conference.  Institutional advertising. Corporate image advertising and advocacy advertising were covered earlier in the section on advertising.  Special events. Organizations very frequently host or sponsor a variety of events and activities that contribute to the quality of life in the communities in which the organizations operate or sell their products.

Application Questions Question 1: What is the role of noise in the General Model of Communication and when is noise most likely to interfere with marketing communication?

Answer 1: In the General Model of Communication, noise refers to anything that interferes with the communication process. Noise can disrupt the communication or impact the effectiveness of the communication and noise can interfere at any time in the marketing communication process. Noise may happen if the sender gets distracted when creating the communication, if the communication itself is unclear, if the medium of communication offers distractions (ie. Advertisements), if the decoding process can be interrupted by outside influences, or if feedback is interrupted.

Question 2: What is promotion and the promotion mix?

Answer 2: Promotion is the set of marketing communication activities designed to inform and persuade important groups of people—primarily customers. The promotion mix is the collection of tools used by managers to develop synergies among combinations of tools and that the mix works better as a group than alone.

Question 3: How do the tools of the promotion mix work together in integrated marketing communications?

Answer 3: The coordination of tools into an integrated marketing communications strategy helps managers to capture the synergies of the promotional mix. A properly planned IMC strategy uses multiple channels of communication to project a single, unified, and compelling message about a brand.

Question 4: Which budgeting method is considered the soundest and most sensible? What are its drawbacks when it is put in use?

Answer 4: The soundest budgeting method would generally be the percent of sales method wherein promotional budgets are set as a percentage of prior year sales or predicted coming year sales. Simplicity is especially achieved in stable markets.

However, it takes a backward view of promotion and assumes sales produce promotion, as opposed to promotion producing sales.

Question 5: Describe the two broad goals of consumer sales promotion.

Answer 5: Consumer sales seek to encourage quick transactions between buyers and sellers or encourage the building of a long-term image of the brand. Short term, it includes the reduction of inventory, encouraging trial, and countering competitor activities.

Question 6: Select an advertisement you consider to be effective, identify the type of advertisement it is and explain what makes it successful.

Answer 6: Student answers will vary. When discussing the success of the advertisement, students should mention the creativity of the advertisement – does it grab the attention of its target audience, does it speed up affirmative purchase decisions, how detailed it is, and if it is capable of multiple executions?

Question 7: Describe the difference between sales promotions and trade promotions.

Answer 7: Sales promotions are designed to persuade customers to make a purchase or to speed up their decision processes. Sales promotion techniques are often integrated into advertising or other promotional activities. Marketers target end customers and supply chain members with sales promotion. Trade promotion encompasses a collection of incentives marketers use to induce business prospects or customers to buy now or to buy more. Often these incentives are used by the firm‘s salespeople, so in some cases they would be considered personalized incentives for a specific customer. Overall, sales promotion targets groups of customers while trade promotion targets members of the supply chain.

Question 8: Why is public relations so critical to companies and how does it relate to other marketing communications?

Answer 8: Public relations is critical to companies as it plays a significant role in shaping their reputation, creating excitement about their product, ensuring customers derive maximum value from their product, and building brand loyalty. Public relation tools include press releases, media kits, digital media content, press conferences, institutional advertising, and special events.

Discussion Questions Question 1: Relate pioneering advertising to primary demand and competitive advertising to selective demand. Looking back to Chapter 8, how is the product life cycle relevant to this question?

Answer 1: Pioneering advertising stimulates primary demand and occurs early in the product life cycle. Competitive advertising stimulates selective demand and occurs later in the product life cycle when there is a specific brand or product to market.

Question 2: The late Nobel Prize–winning economist, Milton Friedman, argued that the only ―social responsibility‖ companies have is to maximize the wealth of their owners.

Does his perspective mean that companies should not employ institutional advertising generally and advocacy advertising specifically?

Answer 2: Institutional advertising and advocacy advertising seek to essentially make a company look good to consumers, either by marketing the positive attributes of the company or by showing that the company is also involved in more altruistic activities outside of producing and selling. While both types of advertising aim to make a company looked upon favourably, as opposed to selling a specific brand or product, this will ultimately maximize wealth of its owners, as Friedman asserts. The two are not mutually exclusive.

Question 3: Considering the Elaboration Likelihood Model (ELM) as it relates to advertising, would the central route or peripheral route to persuasion be a better approach for advertising a vacation package? Beer? a Car? Answer 3: The central route involves logical arguments with product information, while the peripheral route instead represents an indirect approach with stories, music, humor and other emotional triggers to prompt generally positive reactions to the communication with the hope that the positive emotional feelings transfer to the brand. A marketing communication with lots of product information that tries to appeal to logic and persuade a customer through the weight of evidence and logical argument is using the central route. A marketing communication that offers little information, but instead shows friends getting together and laughing or has a humorous story or situation has the intent to persuade via the peripheral route. Advertising a vacation package would likely use the central route as travelers typically want a lot of information about destinations to make an informed decision. The more common route for advertising beer is the peripheral route which will show friends, family, and fun associated with a specific type of beer.

Advertising a car may depend on the target audience. Customers looking for high-end cars may want detailed information about the car so the central route may be more effective.

Question 4: Do brands with high levels of brand loyalty and high market share need to use consumer promotion? Do they need to use trade promotion? Why or why not?

Answer 4: Brands with high levels of brand loyalty and market share may not need to rely as heavily on consumer promotion, as consumers are likely to buy with or without promotion, however, these types of brands will benefit from ongoing trade promotion to ensure that retailers are carrying and selling their product/brand over others in the market.

Without representation in retailers, no brand—regardless of consumer loyalty—will be successful.

Question 5: Is public relations capable of repairing negative perceptions of consumers resulting from bad publicity?

Answer 5: Yes, public relations is capable of repairing negative perceptions of consumers resulting from bad publicity by correcting misinformation, promoting positive stories about the product, building a better brand reputation through accurate communication,

and engaging with customers.

Running Case This Saves Lives (TSL) Video Please note: Video Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-Choice Questions 1. The unique message that TSL communicates is: a. we have premium ingredients b. we are the best tasting bar c. we are the giveback bar d. we ethically source all our ingredients 2. Before TSL could launch a national public relations campaign: a. the bars had to be available nationally b. they had to be successful locally c. they needed to produce and sell a sufficient volume of bars d. they needed to have a bigger variety of flavours 3. In addition to the unique message to consumers, the promotion focused on: a. ethical sourcing of ingredients b. gluten-free varieties c. quality of ingredients d. celebrity involvement in promotions 4. The communication objective to buyers (wholesalers and retailers) was: a. TSL has the best tasting bars b. TSL gives good discounts c. TSL will deliver quality products in the quantities you require d. TSL brings value to your customer Discussion Questions 1. Describe the messaging developed for TSL bars. Is the unique part of the message compelling? If not, how could it be improved?

2. Ryan mentions Kristen Bell, who regularly promotes TSL bars on national TV show like ―The Ellen DeGeneres Show.‖ How effective do you think this kind of promotion is?

3. If you were preparing a PR packet for TSL, what information would you include?

Running Case This Saves Lives (TSL) Questions Answers might include the following: 1. What should the TSL team do? What do they stand to gain through mass media TV advertising? What do they stand to lose? What about maintaining their current strategy?

What gains and losses do you see from this course of action?

The TSL team could consider launching a TV advertising campaign in selected markets to test its effectiveness. The gains of advertising through mass media TV include significant increases in brand awareness among consumers; losses include the revenue impact of the cost of advertising on TV. Maintaining their current strategy limits their ability to reach a wider audience quickly, but it allows them to maintain greater control over the message that consumers receive and control over communication costs.

2. Suppose that the TSL team decides that TV advertising might be effective at reaching outside their current target market to attract older users to the brand. Older demographics tend to be less socially progressive than younger users; however, they watch considerably more television. Could enough of these consumers be introduced to the brand to make TV less risky? Would such a strategy help or hurt their current promotional efforts? Why or why not?

This question will usually get students siding to either use mass media or avoid mass media, and they can often have a lengthy discussion of point/counterpoint on the decision. A useful way to approach this discussion is to solicit a small handful of reasons for/against and list them. Then, ask the more basic question that is really at the root of the decision. Are older consumers (who do indeed watch more traditional TV) an appropriate target market for TSL? Are older consumers likely to eat bars? How many?

When/where? This is the information they need before they consider if mass media is appropriate and this is a good spot to remind students to keep the target audience in mind when making all decisions, not just those about promotion. Some older consumers will eat bars and be interested in the social mission and be willing to pay a higher price. So, the question is where can we find these customers and are there enough of them to warrant mass media spending?

To determine if there are sufficient audiences, the TSL team would need to identify (probably through an agent) the demographics of various TV shows to determine which shows are watched by older consumers that could be their target customers, then run ads during those shows in limited markets to test if they attract older buyers. If they are able to expand their customer base without diluting the brand image or the appeal to their primary audience, the investment in mass media TV advertising could be justified, though note there might be more efficient ways to get a better return on the promotion investment spending and a comparison should be made to decide how best to use the budget.

3. Consider the case for TV through the lens of ethics. TSL’s mission is to save lives. Is it morally committed to save as many lives as possible? Does the company have an

obligation to pursue aggressive growth strategies to maximize its efforts to alleviate hunger?

In order to fulfil its mission of saving lives, TSL needs first of all to be successful in order to stay in business, so the team needs to have a sound plan for growth that includes wise use of its spending. TSL should focus on the best return on marketing investments to be as effective in their mission as possible.

Application Exercise Advertising professionals often make “creative briefs” to help guide advertising campaigns and make sure that all advertising team members are working together so that resources are not wasted. Suppose you are an advertising executive hired by TSL. Make a creative brief for your client: 1. Background: Write a paragraph explaining the background of the company. (This paragraph would be shared with the client to assure that your perceptions and the client’s perceptions are the same.)

Paragraph should include the two main objectives of the company: to provide the besttasting snack bar made from premium ingredients and to save malnourished children by providing one PlumpyNut nutrition bar for every snack bar sold.

2. Describe the target audience or audiences.

TSL considers its primary target audience to be Millennials who snack and care about social issues and who focus on developing relationships with brands they feel are engaging and have value, but TSL is open to expanding the audience to those outside the Millennial demographic.

3. Based on the target audience, what’s the campaign objective? Look at the hierarchy of effects model presented in this chapter for a little guidance on how this would work.

The objectives might include broadening the audience‘s awareness of and knowledge about TSL bars and its humanitarian mission, stressing the good taste of the bars in order to motivate customers to try TSL bars and to continue buying them.

4. What key benefits will be promoted by the campaign? Importantly, the campaign does not have to promote all key benefits. Pick one you believe will resonate soundly with the target audience.

There is no one right answer, but students might pick the premium ingredients, the better flavour, or the humanitarian mission of the company. One approach is to list all the benefits students raise, and them have them rank order them by ―voting.‖ This would then be used as information for answering 5 and 6 below.

5. Develop a creative theme for the campaign. What one thing should audiences take away from exposure to the advertising creative? Creative themes are frequently tag lines or slogans. Write a tag line or slogan for your campaign. The slogan can guide the messaging in your campaign on digital media, social media, and on mass media.

The current tagline on the website is ―Better tasting. Bigger impact.‖ Challenge students to come up with something even better.

6. Using the section on creativity in advertising in this chapter, select an execution style for your campaign. How will the creative theme actually take form? If you do not believe TV mass media advertising is advisable for TSL, that’s fine. Execution strategies apply to any media, traditional or not.

Since TSL already uses celebrity endorsements (Kirsten Bell), see if students come up with a different theme—perhaps testimonials from brand-loyal customers, who love the bars and love the mission.

Chapter 12 Using Personalized Promotion to Communicate with Customers Overview of Personalized Promotion Advantages and Disadvantages of Personalized Promotion When to Use Personalized Promotion LO 12.1 Explain the advantages, disadvantages, and the most appropriate uses for personalized promotion.

Personal Selling What is Personal Selling and How Is It Different from Other Jobs?

Types of Sales Jobs The Personal Selling Process Salesperson Compensation LO 12.2 Describe how personal selling differs from other marketing jobs, common personal selling jobs, the sales process, and common salesperson compensation.

Direct Marketing What is Direct Marketing and How Do We Use It? Direct Marketing Promotional Tools Guidelines for Effective Direct Marketing Legal, Ethical, and Privacy Considerations LO 12.3 Describe direct marketing promotion tools, guidelines for effective direct marketing, and the key legal, ethical, and privacy issues related to direct marketing.

Chapter Introduction In this chapter, we explore the personalized communication tools marketers have

available for targeting individual customers.. In LO 12.1 we look at the advantages and disadvantages of personalized promotion and when to use personalized promotion. Next, in LO 12.2, we define personal selling, examine personal selling jobs, and discuss salesperson compensation. In LO 12.3, we learn about direct marketing.

Present the Industry Expert video to the class in which Ethan Zon, Senior Director of Strategy at Influence Marketing, highlights just how important personalized promotions have become, especially with the increasing need to directly connect with customers through digital marketing channels.. Discuss with the class the role of digital amplification and new media play in allowing marketers to connect in more meaningful and personalized ways with target audiences. Ask the class to think about how these new media options complement the traditional media marketers have used for decades.

Industry Expert Video Ethan Zon, Influence Marketing Please note: Video Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-choice Questions 1. What area does Influence Marketing assist with? a. brand promotions b. customer experience c. digital marketing d. social media 2. What reason does Ethan give for the importance of personalized promotions? a. it‘s easy due to digital marketing b. traditional marketing is not effective c. customers want to be seen as individuals d. it saves the company money 3. What is one digital method Influence Marketing uses to personalize communication? a. user-generated content b. responding to comments individually c. creating brand awareness d. daily social media posts 4. How did Ethan say personalized promotion will change? a. privacy legislation will ease providing more opportunities b. it will be replaced with new digital tools c. customers won‘t be able to opt out d. content must resonate with consumers Discussion Questions 1. What are the benefits of using personalized promotion?

2. How does Influence Marketing use digital marketing?

3. What are the biggest changes that brands will need to make to continue personalized promotions?

Overview of Personalized Promotion LO 12.1 Explain the advantages, disadvantages, and the most appropriate uses for personalized promotion.

Personalized promotion requires that the marketer have the ability to communicate at the individual level and earn enough in return to warrant the higher cost typically associated with targeting individuals. Personal selling and direct marketing are the two primary tools for personalized promotion.

Advantages and Disadvantages of Personalized Promotion When compared with group promotion, personalized promotion has several advantages.

First, where group promotion is often hampered by excess noise interfering with the communication process, personalized promotion often reduces noise. Direct marketing via an email or letter addressed specifically to the individual customer is more likely to get a customer‘s attention. Second, personalized promotion targets the individual customer with a message that is more relevant and persuasive, which is enhanced by the feedback that occurs with personalized communication. Third, while group promotion can be an effective choice for communicating relatively simple messages, more complex buying scenarios with complex messaging and decision-making tend to be more effective with the use of personalized promotion. Finally, unlike group promotion effectiveness, which is difficult to track and measure, marketers can readily measure effectiveness of personalized promotion.

There are some disadvantages to be considered. First, unlike group promotion, personalized promotion takes significantly more time in process as the communication process works at the individual level. Second, personalized promotion is significantly more expensive per contact compared to group promotion. As a result, the cost per contact is quite high relative to group promotion. A final disadvantage of personalized promotion is the effort required to complete a transaction. Personal selling often requires multiple interactions that take place over a long period of time. Ask the class for examples of personalized promotion.

When to Use Personalized Promotion In certain situations, personalized promotion will be more effective. First, when companies have fewer customers or smaller target segments, or when customers are located in the same place, personalized promotion is more appropriate (ie. personal selling is widely used in B2B markets). Secondly, personalized promotion is more appropriate in complicated buying situations, where the benefits of the product or service are not easy or straightforward to communicate (ie. medical equipment, insurance, and legal services). Third, personalized promotion is appropriate when it is possible to identify specific buyers. It is important to note that even if these three conditions are met, personalized promotion is only appropriate when margins on the product or service are significant enough to justify the relatively high cost per customer associated with personalized promotion.

Discuss the ethical dilemma included in the chapter: You are a salesperson who sells 3D printing software and hardware combination packages for small manufacturing businesses. You have been working with a small startup for several months that designs and produces gaming miniatures they sell online to gamers. You have visited several times and made presentations to the owner of the company promoting your 3D printing combo packages. The company has outgrown its capacity with its current equipment and is considering upgrading. After assessing the quality and quantity needs of the company, you have recommended a specific combo package that has a total price of $3500.

However, you recently attended an industry trade show and have seen a new combination available from a competitor that is only $3,000, has the same quality capability, but is actually 10% faster (so will produce more per day). In addition, your company has been working on a new combination that will actually have higher quality and produce as fast as the competitor product, but only cost $2500. However, it won‘t be available for another month. Ask the class what you should do if the customer seems ready to buy now. Do you tell the customer about either the competitor product or your new option that will be available soon? Why or why not? What is ethical in such a situation?

12.1 Concept Check Question 1: Describe the advantages and disadvantages of personalized promotion.

Answer 1: The following are advantages of personalized promotion:  Personalized promotion often reduces noise - direct marketing by an email or letter addressed specifically to the individual customer is more likely to get a customer‘s attention.  Personalized promotion targets the individual customer with a relevant and persuasive message.  Personalized promotion is effective with complex buying scenarios with complex messaging and decision-making.  Marketers can readily measure effectiveness of personalized promotion.

The following are disadvantages of personalized promotion:  Personalized promotion takes significantly more time as the communication process works at the individual level.  Personalized promotion is significantly more expensive per contact compared to group promotion. As a result, the cost per contact is quite high relative to group promotion.  Personalized promotion can require significant effort to complete a transaction.

Multiple interactions that take place over a long period of time are often required.

Question 2: When is use of personalized promotion most appropriate?

Answer 2: There are three scenarios when personalized promotion is more effective:  When companies have fewer customers or smaller target segments, or when customers are located in the same place,

 

In complicated buying situations, where the benefits of the product or service are not easy or straightforward to communicate, and When it is possible to identify specific buyers.

Personal Selling LO 11.2 Describe how personal selling differs from other marketing jobs, common personal selling jobs, the sales process, and common salesperson compensation.

Personal selling is any selling activity that involves direct interaction between buyer and seller. As such, personal selling is distinguished from mass market promotion tools, such as advertising, in that advertising entails a one-way flow of information from seller to buyer through some media-based communications channel. With personal selling, the interaction is direct and two-way, the selling message may be adapted to meet changing circumstances, and feedback is immediate.

What Is Personal Selling and How Is It Different from Other Sales Jobs?

Personal selling differs greatly from other jobs in the marketing profession, often in ways that are at once very rewarding and very challenging. First, personal selling is what organizational theorists refer to as a boundary spanning job. This means that the job itself is performed across the organizational boundaries that separate buyers from sellers.

Second, professional selling is not a routine job; it varies day to day. Many salespeople must play multiple roles as they go about the various tasks required by the job. The job requires great flexibility, adaptability, and innovativeness. Third, unlike most occupations, salesperson performance is easily and objectively quantifiable. Ask students to relate these comments to any sales position they have had. What did they like or dislike about sales work?

Types of Sales Jobs There are many different categorizations of selling jobs. Inside sales jobs respond to customer-initiated sales interactions, in which the customers contact the company.

Outside sales jobs describe situations when salespeople initiate the sales interaction by calling on prospective customers. Missionary salespeople's main function is to spread the word about the brand to those that influence a purchase decision. Often a missionary salesperson will turn a prospect over to another salesperson to actually complete the sale.

Prospector salespeople (prospectors) identify and qualify potential customers, and in many cases identify prospects who are not actively in the market for the product yet.

While trade salespeople represent manufacturers, distributors, and wholesalers, calling on retailers to sell and resell products, consultative salespeople act as consultants, providing solutions to problems. Account managers have a specific customer base and oversee maintaining relationships with these accounts and increasing the sales to these accounts over time. Transactional salespeople focus entirely on managing and creating a single sale and are frequently seen in markets with a high margin with less frequent

purchases such as automobiles, furniture, and real estate. Finally, technical salespeople provide a high level of expertise and knowledge in a particular area to help facilitate a sales transaction.

The Personal Selling Process In personal selling, most sales require hard work. The process does not always lead to success; however, not following these simple steps all but guarantees less than successful results.

Steps One and Two: Doing Your Homework Before salespeople can sell anything, they must find customers to whom they can sell.

So, the first step in the personal selling process, called prospecting, involves identifying and qualifying potential customers. Some salespeople ask current customers or prospects for the names of other people who might be interested in the products in question, which is a technique called snowballing. After prospects are identified, they must be qualified.

The salesperson must ascertain whether the prospect is worth the effort to research and contact.

The second step, preparation, seems obvious but is often overlooked or done poorly.

Preparing to make a sales call involves much more than simply knowing your own products. Effective salespeople should attempt to learn as much as possible about the prospect‘s business.

Step Three: Making Contact Step three is called the approach, which occurs when a salesperson has his or her first meaningful or substantive contact with a prospect. In practice, the approach may follow a series of preliminary contacts known as the pre-approach. The pre-approach may involve phone calls or emails or stopping by to leave a business card or product information.

Steps Four and Five: Making the Case Step four is the sales presentation, also known as the ―sales pitch.‖ The presentation occurs when the salesperson delivers the basic sales message to the prospect. Salespeople may use several types of presentations, which vary by how much of the presentation is scripted versus how much is improvised. At one end of the spectrum is the canned sales presentation, which is completely scripted. At the other end of the spectrum is adaptive selling. As the name implies, adaptive selling requires salespeople to adjust their sales presentations to meet the needs of the circumstances at that moment.

Step five is meeting customer objections. During virtually all sales presentations, prospects will voice one or more objections to some aspect of the presentation. The

salesperson must be ready to handle these objections no matter how they‘re offered.

Steps Six and Seven: Closing the Loop Steps six and seven focus on asking the prospect for an order. Step six is making trial closes. Trial closes help the salesperson transition from meeting customer objections to closing the sale. Suppose a prospect objects to a salesperson about price. The salesperson responds to that objection, perhaps with information about product efficiency that saves money during use. The trial close would begin with the salesperson asking if the prospect understands how the price of the product is not too high given its efficiency and whether the salesperson has addressed the prospect‘s concerns. For each objection, the salesperson should use a trial close by simply asking if the concern has been answered satisfactorily and whether other concerns remain. Once all concerns have been settled, the salesperson can turn to closing the sale.

In its simplest terms, step seven, closing the sale, is just asking for the order.

Experienced salespeople often say that the biggest mistake beginning salespeople make is not asking for the order.

Ask students how well a personal experience they have had matches up with these steps say, when buying a car or computer.

Review the sales funnel in Figure 12.4. Through sales efforts and coordinated promotion, potential customers become aware of the product or service. More effective prospecting leads to higher awareness. The salesperson will make initial contact with customers that have some level of interest in the product (approach) and try to encourage further consideration of the product. From this point the salesperson works to develop an intention to purchase. Note the concept of the funnel highlights both the high level of effort required to make a sale and the fact that fewer and fewer prospects move to each successive level in the funnel.

Salesperson Compensation Because sales jobs are often difficult and require a special skill set, some of the highest paying jobs available are for skilled and productive salespeople. The range of salaries is indicative of the different sales jobs discussed earlier. As a general rule, inside sales jobs pay significantly less than outside sales jobs, and technical sales jobs pay significantly more than less technical sales jobs in markets with lower profit margins. Outside sales represents the most essential and, in many cases, most lucrative sales careers, and compensation in outside sales includes some combination of salary, commission, incentives, bonuses, and expense accounts in addition to the usual benefits also offered in many corporate positions.

Salary is perhaps the most basic form of salesperson compensation. Inside salespeople and retail sales often get paid a salary. The advantage of salary is that the salesperson has

some predictable income, but the big disadvantage of salaries is that the pay is not directly based on sales performance. For this reason, companies virtually never use only salary for outside salespeople.

Commission is a sum paid to the salesperson tied directly to the amount of product sold.

Most commissions are paid as a percentage of either the selling price for a product or in some cases a percentage tied to the profit margin for a specific product. Average sales commission rates vary considerably based on the type of sales involved, complexity, sales cycle length, and other factors. The more sales a salesperson makes, the higher the compensation. A graduated commission structure pays higher levels of commission for higher levels of sales, most often tied to sales thresholds. The big disadvantage of commission is that the salesperson does not have a stable base of guaranteed income, nor is the income predictable. A salesperson paid only on commission might only focus on sales and not follow up with customers.

A third compensation option often paid to salespeople are incentives. Incentives offer salespeople single-payment, extra compensation for achieving specific objectives. Sales contests are common in many industries, offering salespeople a chance to earn extra compensation for selling the most product. Bonuses can also be given for achieving specific sales targets. Bonuses can be particularly effective when motivating sales teams or the salesforce to achieve a group objective. Incentives can foster competition or cooperation depending on how they are applied.

Finally, outside sales compensation often includes expense accounts and allowances.

Expense accounts and allowances provide salespeople with reimbursement for certain expenses deemed useful or necessary in the selling process. Outside sales often involves extensive travel, so some companies provide salespeople with allowances for travel expenses such as mileage or airfares, hotel stays, etc. Companies will have limits and guidelines for what can be paid for or reimbursed by the company as part of an expense account or allowance.

It is most common for companies to use a combination of these sales compensation options. However, the combination might change based on the selling situation and salesperson‘s experience. Younger salespeople are often offered a base salary plus commissions and will have fairly strict and specific expense account and allowance guidelines. More experienced salespeople will often opt for a higher percentage of their compensation to be commission based (or even entirely commission based) and will have less restrictive expense accounts and allowance guidelines.

Concept Check Question 1: What are the advantages and disadvantages and common uses for personalized promotion?

Answer 1: Personalized promotion has the following advantages:

   

Less noise in communication, Ability to target the individual customer with a message that is more relevant and persuasive, Can deliver complex messaging which requires complex decision-making, Ability for marketers to readily measure effectiveness of personalized promotion.

Personalized promotion has the following disadvantages:  Takes more time to communicate,  More expensive per contact,  More effort to complete a transaction.

The most common use of personalized promotion is to deliver targeted messages to specific individuals.

Question 2: Why is personal selling a boundary-spanning job, and how does it factor into differences between personal selling and other marketing jobs?

Answer 2: Personal selling is a boundary-spanning job because rather than function with a one-way flow of information like advertising does (from seller to buyer through mediabased channel), interaction is direct and two-way. It is performed across organizational boundaries that separate buyers from sellers, working to solve customers‘ problems while negotiating terms of a deal. It is a job that varies day to day and as such, salespeople must play multiple roles throughout various tasks. Job performance is easily and objectively quantifiable: measured in dollars or sales unit.

Question 3: What are the common sales jobs?

Answer 3: Common sales jobs include:  Inside sales jobs respond to customer-initiated sales interactions (customers contact the company). Outside sales jobs describe situations when salespeople initiate the sales interaction by calling on prospective customers.  Missionary salespeople spread the word about the brand.  Prospector salespeople (prospectors) identify and qualify potential customers.  Trade salespeople represent manufacturers, distributors, and wholesalers.  Account managers have a specific customer base and oversee maintaining relationships with this customer base.  Transactional salespeople focus entirely on managing and creating a single sale.  Technical salespeople provide a high level of expertise and knowledge in a particular area to help facilitate a sales transaction.

Question 4: In the personal selling process, how do trial closes link meeting objections and closing the sale?

Answer 4: Trial closes help the salesperson transition from meeting customer objections to closing the sale. Suppose a prospect objects to a salesperson about price. The salesper-

son responds to that objection, perhaps with information about product efficiency that saves money during use. The trial close would begin with the salesperson asking if the prospect understands how the price of the product is not too high given its efficiency and whether the salesperson has addressed the prospect‘s concerns. For each objection, the salesperson should use a trial close by simply asking if the concern has been answered satisfactorily and whether other concerns remain. Once all concerns have been settled, the salesperson can turn to closing the sale.

Question 5: What are the common forms of compensation for salespeople and what are the uses for each form?

Answer 5: Compensation usually includes a combination of salary, commission, incentives, bonuses, and expense accounts. Inside salespeople and retail sales often get paid a salary. Salespeople may also be paid a commission (a sum paid to the salesperson tied directly to the amount of product sold) or be offered incentives. Incentives can foster competition or cooperation depending on how they are applied. Additionally, bonuses can also be given for achieving specific sales targets. Bonuses can be particularly effective when motivating sales teams or the salesforce to achieve a group objective.

Finally, outside sales compensation often includes expense accounts and allowances. It is most common for companies to use a combination of these compensation options. The combination might change based on the selling situation and salesperson‘s experience.

Direct Marketing LO 12.3 Describe direct marketing promotion tools, guidelines for effective direct marketing, and the key legal, ethical, and privacy issues related to direct marketing.

What is Direct Marketing and How Do We Use It? Direct marketing is promotion to an individual consumer that includes an offer, information to justify purchase, and a method for customers to respond. Marketers use six common direct marketing tools: Direct Marketing Promotional Tools Direct mail. One of the oldest tools, marketers still send individuals offers via mail, often derogatorily labelled ―junk mail.‖ Many consumers think that direct mail doesn‘t work.

However, from research we know that direct mail does work if the offer is good, and the supporting information is sufficient and compelling.

Email. Marketers use email because getting email addresses is relatively easy and inexpensive. The cost to email 100 prospects versus 1,000,000 prospects is virtually the same.

Phone/telemarketing. Although you might think telemarketing is decreasing in

popularity, marketers still use phone contact for promotion.

Mobile. As with most marketing tools, promotion has also moved to mobile devices.

Catalogues. Marketers have used catalogues for hundreds of years to promote and sell directly to customers.

Coupons. While we earlier described coupons as a form of sales promotion, we also include them here as a direct marketing tool.

Guidelines for Effective Direct Marketing As with other forms of promotion, some direct marketing efforts are better than others. In general, direct marketing performs more effectively when it meets these six guidelines: Discuss this list with the class. Ask for examples that fit each item.      

The list has to be recent and appropriate or relevant.

The offer must be attractive.

The timing of the offer must maximize perceived value.

You must have an effective and convenient response option for customers.

Creative communications increase attention and awareness, and generally are more effective than those that are less creative.

The media must match the offer, customer, and message.

One of the keys to success in any direct marketing campaign is the list of individual customers. Lists can be:  purchased from a list broker,  rented from another company,  developed by lead generation services, or  compiled internally from previous history with customers.

Factors that affect the price of lists include the size of the list, the level of customization and targeting required, the data sources, and any additional services such as cleaning or reorganizing the list.

Discuss the Applied Metrics scenario included in the chapter: One of the primary benefits of direct marketing is the ability to accurately measure marketing outcomes. The marketer knows who was sent an offer or promotion and is also able to tell who responds to an offer. The trick, of course, is getting someone to respond in a way that meets your marketing goals. Mobile, email, mail…all can be tied to specific marketing objectives. As you learned in Chapter 11, goals can be set to measure effectiveness at different stages in the hierarchy of effects. Awareness is necessary before a customer can develop knowledge about the product. Knowledge can lead to liking. Liking can lead to preference, and preference to purchase. Direct marketing (as well as other forms) is often measured in terms of conversions. How many people that received the ad clicked on or opened the ad? How many people watched the ad or listened to the ad? How many people

eventually bought? All of these steps are important, and conversions can be measured at each level.

Conversion rate is calculated as a percentage as follows: Conversion rate = (Number of people who responded to an offer ÷ total number who received the offer) × 100 for percentage.

Assume you are an intern for a company that has decided to use a direct mail campaign to sell a new product. You have decided to test two direct mail options. One option is a 1page direct mail piece that highlights the key benefits of the product. The second option is a 5-page mailer that provides a lot more information about the product. You send the 1page mailer to 200 people. 50 open the mailer, 10 read the mailer, and 2 people eventually purchase. The 5-page mailer is sent to 100 people. 10 open the mailer, 3 read it, and 2 eventually purchase. Review with the students the calculations of the conversion rate for both mailer options for the % who opened the mailer, the % who read the mailer, and the % who purchased responding to the mailer.

Legal, Ethical, and Privacy Considerations for Direct Marketing While legal issues are an important concern for using direct marketing, companies should also consider the potential ethical and privacy concerns tied to using direct marketing.

Customers are often unaware and surprised by how much personal data is collected and what happens to that data. This raises concerns about what data is collected, how it is stored, and who has access to this data. In recent years, there has been an increased desire for more transparency in the collection, storage, and access of data.

Author Podcast 12.1 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1.Andrew Loos says that salespeople are: a. one of several effective ways of selling one‘s brand/product b. key to creating brand loyalty c. of decreasing importance in the digital age d. used mostly for in-store demos 2. Nike uses brand ambassadors to: a. create ads for national TV spots b. host receptions at key retail locations c. train in-store reps to be effective Nike ambassadors d. direct media campaigns 3. In addition to its brand ambassadors, Nike: a. has reps not associated with the brand but trained through the brand b. has a sales group responsible for checking inventory levels and displays in retail stores c. has an incentive program for in-store salespeople d. has annual events to recognize top in-store salespeople 4. Retail education refers to: a. retail companies that provide tuition assistance to their employees b. training programs that focus on effective selling techniques c. product-specific training for in-store salespeople d. online courses in personal selling Discussion Questions 1. What are the various roles of brand ambassadors?

2. What steps has Nike taken to ensure that in-store salespeople are effective salespeople for the Nike brand?

3. According to Andrew Loos, why is personal selling likely to endure, even in the digital age?

12.3 Concept Check Question 1: What is direct marketing, and why is it a useful promotion tool for communication with customers?

Answer 1: Direct marketing is promotion to an individual customer that includes offer, information to justify purchase, and method for customers to respond. It differs from direct response advertising in that it is personalized at the individual level based on a list of actual customer names, whereas direct response advertising is promotion to a group. It is a useful promotional tool because it is measurable and therefore offers opportunity for fine-tuning and better responses. It also is less dependent on brands which can equalize the marketing power for smaller brands.

Question 2: What are the most common direct marketing tools?

Answer 2: Common direct marketing tools include: direct mail, email, telemarketing, mobile devices, catalogues, and coupons.

Question 3: What legal and ethical issues should marketers consider when using direct marketing?

Answer 3: Companies should consider the potential ethical and privacy concerns tied to using direct marketing. The method of data collection, storage, and who has access to data should all be considered.

Question 4: What general guidelines should marketers follow to use direct marketing effectively?

Answer 4: Guidelines for effective direct marketing include:      

The list has to be recent and appropriate or relevant.

The offer must be attractive.

The timing of the offer must maximize perceived value.

You must have an effective and convenient response option for customers.

Creative communications increase attention and awareness, and generally are more effective than those that are less creative.

The media must match the offer, customer, and message.

Application Questions Question 1: List five products that you think would be most likely to use personal selling for promotion.

Answer 1: Answers will vary. Sample responses include college textbooks, home improvements (house painting, roofing, flooring, windows, paint), services (life insurance, financial planning), and software (SalesForce).

Question 2: Imagine you are a salesperson for a software company. How would you apply the personal selling process to help a potential client identify their needs and find the best software solution?

Answer 2: Answers will vary, but students should consider the steps in the personal selling process: 1) prospecting which involves identifying and qualifying potential customers, 2) preparation, 3) the approach, 4) the ―sales pitch‖, 5) meeting customer objections, 6) trial closes, 7) closing the sale.

Question 3: What is the major benefit of direct marketing?

Answer 3: Direct marketing is a useful promotional tool because it is measurable and therefore offers opportunity for fine-tuning and better responses. It also is less dependent on brands which can equalize the marketing power for smaller brands.

Question 4: Analyze a direct marketing campaign you have recently encountered, either through email, direct mail, or telemarketing. What made it effective or ineffective? How could it be improved?

Answer 4: Student answers will vary based on their experiences. Answers should include an analysis of whether the target market is appropriate and relevant, the attractiveness of the offer, the timing of the offer, the ability of the customer to provide feedback, and the creativeness of the campaign. Some consideration to whether the media matches the offer, customer, and message.

Question 5: Design a direct marketing campaign for a small business, incorporating elements of the personal selling process. Outline the key components, target audience, and desired outcomes of the campaign.

Answer 5: Answers will vary, but students should consider the steps in the personal selling process: 1) prospecting which involves identifying and qualifying potential customers (target audience), 2) preparation, 3) the approach, 4) the ―sales pitch‖, 5) meeting customer objections, 6) trial closes, 7) closing the sale.

Discussion Questions

Question 1: How has the role of personal selling evolved in the age of digital marketing?

What are the key skills a successful salesperson should possess in this new era?

Answer 1: The age of digital marketing has transformed the role of personal selling.

Traditional face-to-face interactions have been complemented by digital channels. A successful salesperson needs to be adaptable, open to continuous learning and change.

They also need to possess good communication skills, digital literacy, and the ability to analyze and interpret the vast amount of data their potential customers have access to.

Lastly, they need to leverage various social media platforms to increase and expand their network of potential customers.

Question 2: How do ethical considerations come into play in personal selling processes?

Share examples of potential ethical dilemmas and how they can be addressed.

Answer 2: Ethical dilemmas can include honesty and transparency, pressure and coercion, confidentiality and privacy, and discrimination and fairness. Students will have various examples of ethical dilemmas. Companies should establish clear policies and procedures, as well as a code of conduct for their employees. With established guidelines and codes documented, it is then important for companies to train and educate their employees.

Question 3: In your opinion, how does boundary spanning make personal selling an attractive job? How do you think boundary spanning would make personal selling more challenging?

Answer 3: Answers will vary but may point to attributes of personal selling such as having a job that changes every day—foregoing the monotony of a single-task job; being able to work directly with other people; meeting challenges; being able to use creativity and powers of persuasion; travel; and the possibility for a large income. Challenges of personal selling may include difficulty of the task at hand—it may be hard to convince someone to buy something; income is mostly contingent upon success in selling (i.e., if you don‘t sell, you don‘t earn). Some of the things that make the job attractive may also present challenges/drawbacks: wide variety of tasks to do, travel, requiring powers of persuasion, always needing to be ―on‖ to be able to successfully work with people.

Question 4: Many consumers think direct marketing is annoying and wonder why companies still insist on mailing to them, calling them, or sending emails. Given this sentiment, why do marketers still use direct marketing?

Answer 4: Direct marketing continues to be used by brands because it is both measurable (if 20 people are called and 4 respond positively, the marketer knows the return on marketing investment, and also knows which customers responded which can then be parlayed into sales or helpful information that can help revise marketing to reach different customers) and is less reliant on brand, which can equalize power with smaller

brands. Response is based on making an offer, and without the offer (especially for smaller brands), there will be no response.

Question 5: Have you gotten any telemarketing calls on your mobile phone? Should marketers be able to use your mobile number to text or call you for promotion purposes?

Why or why not?

Answer 5: Answers will vary, but it is very likely that most, if not all, with have received telemarketing calls on mobile phones. Discussion in classroom can be based around students‘ opinions on this subject: some who think it is okay for marketers to use text or calls to a mobile may argue that based on the fact that more people have mobile phones as opposed to home landlines, it is simply the way that telemarketing has evolved.

Additionally, the point can be made that telemarketing using mobile numbers can often be more targeted to certain consumers because mobile numbers are most often associated with a specific person—demographic information can help to tailor calls to likely customers. Those who argue that telemarketers should not be able to call or text mobile phones may argue that it is an invasion of privacy.

Answer 6: Businesses can integrate personal selling and direct marketing into a comprehensive marketing strategy by ensuring the personal interactions complement the direct marketing. Direct marketing will reach wider audiences with customized messaging whereas personal selling leverages face-to-face interactions. Both approaches need to have the same target market, there needs to be consistent messaging and communication, as well as consistent product branding. There should also be constant communication amongst the marketing team to ensure the approaches are complementing each other.

Running Case This Saves Lives (TSL) Video Please note: Video questions do not appear in the ebook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple-choice questions are bolded.

Multiple-Choice Questions 1. The place strategy used by TSL was a. start local and boutique, and then expand slowly. b. find a quality partner like Starbucks that would quickly give the brand a national outlet. c. start local in grocery stores that are part of a national chain. d. start local in health food stores.

2. Ryan says that as a food company, they must always be aware of a. issues like availability of product ingredients. b. how consumers respond to their flavors. c. all the Ps and Cs. d. the price of their main competitors.

3. Because they are a small company, a. everyone participates in all decisions. b. they work especially hard to get good distribution partners. c. they have to be extra vigilant about inventory levels in their retail outlets. d. they have to be more aggressive about pricing.

4. Their overall strategy is a. start small and grow. b. follow Kind bar’s pattern of growth. c. improve profits every year. d. become the number one food bar in the industry.

Discussion Questions 1. Are any of the Ps or Cs less important to a small company like TSL? If so, why?

2. How effective is their strategy of partnering with companies that will give them a broader reach over time? Is there a different strategy they might consider? If so, please outline it.

3. What are some possible negatives of having the entire team participate in important strategy decisions?

Running Case This Saves Lives (TSL) Questions Answers might include the following: 1. What are the potential advantages and disadvantages for customers, TSL, and the aid recipients if TSL adds the Direct Giving Option?

Student answers will vary but could include advantages should include: increased brand recognition, increased visibility of TSL‘s partners, increased donations for starving children. Some disadvantages may include: loss of involvement in the givings (money going directly to partners), additional costs, loss of customers if customers decide not to purchase bars but just give directly to malnutrition, and the possibility that customers may question TSL‘s motives or business model.

2.Which customers do you think would be most responsive to the Direct Giving Option and which customers do you think would be the least responsive?

Student answers will vary. However, it should be obvious that customers who are desiring to give more to help fight malnutrition will be most responsive to the Direct Giving Option. If customers are provided with the information to give directly, then the customers least responsive (or those not interested in giving extra money) will simply be the customers that chose not to give directly to the partners.

3. Do you think the Direct Giving Option should be available to customers through both group and personalized promotion options?

Student answers will vary, however answers should include the advantages of both options. Group selling can target all customers. This will reach specifically the community of customers that want to help fight malnutrition. TSL will be able to effectively reach a larger audience with group selling. Personalized selling would allow TSL to target specific customers which may result in higher donations by fewer, individual customers. It would also allow TSL to target only those customers who would be most responsive.

4. Which personalized methods of promotion do you think would work best for the Direct Giving Option? Justify your choices.

Student answers may vary. Personalized selling may be costly and more difficult for TSL, however, if they chose to use personalized selling methods, they should consider direct marketing. Direct marketing will allow TSL to send targeted messages to customers who have given before. This could include direct mail, one-to-one messaging, or personalized email campaigns. Telemarketing would not likely be cost effective and would not be recommended. TSL could also consider coupons for free products given certain levels of donations (this may be difficult to track given the current model so adjustments may be required).

Application Exercise Often it is difficult to decide how to meet a specific marketing goal and there might be several ways to achieve similar outcomes. Assume the TSL team has decided that they want to target some, but not all, of their customers with the Direct Giving Option. This suggests personalized promotion methods might be a better option given the ability to target individual customers. Develop a profile of the target customers you think would be the most appropriate for the Direct Giving Option. Then, identify the direct marketing option you think would have the most success encouraging these customers to give.

Finally, create a specific message you would suggest and describe the content for the chosen direct marketing option. Once completed you should have a brief outline of a direct marketing campaign that includes the target customer profile, message content, and the justification for using a specific direct marketing tool to achieve your communication goal.

1. Develop a profile of the target customers you think would be the most appropriate for the Direct Giving Option.

Answer should include characteristics of the target customers. Currently, TSL‘s primary target audience is Millennials who snack and care about social issues. These customers want to fight hunger are compassionate and desire to make a difference. They are more likely to volunteer for charitable causes such as food banks and homeless shelters.

2. Identify the direct marketing option you think would have the most success encouraging these customers to give.

There is no right answer, but students might pick email or mobile devices. Since TSL‘s target audience is Millennials, they are very tech savvy. This would lead to the answer of mobile promotion or a personalized email campaign.

3. Create a specific message you would suggest and describe the content for the chosen direct marketing option.

The message might include broadening the audience‘s awareness of and knowledge about TSL bars and its humanitarian mission. The goal of the messaging is to connect TSL with the fight against malnutrition and increase donations..

4. Businesses often desire to market products using both a personal selling approach and a direct marketing approach. Assume TSL decides to add the Direct Giving Option. Let’s try to determine how TSL could use both approaches in marketing this option.

a) Determine how TSL could use the personalized promotion approach to communicate with customers.

b) Determine how TSL could use the direct marketing approach to communicate with customers.

c) Could these two approaches both be used in marketing the Direct Giving Option?

What approach would you recommend? Why?

Answer a: Answers will vary, but will need to include the elements of personalized selling. Personalized selling is one-on-one interactions between a buyer and seller.

Answer b: Answers will vary, but some suggestions should include those mentioned in the case. Instructions added on the packaging and on the website, as well as marketing using social media.

Answer c: Student answers will vary. However, many students will likely suggest that although two approaches could be used, the personalized selling approach would likely be expensive and not worth pursuing. A direct marketing approach would be more advantageous for TSL.

Chapter 13 Encouraging Participation to Connect with Customers Customer Connections in the Age of Digital Marketing Defining Digital Marketing, Digital Media, and Digital Media Tools The Meaning and Importance of Customer Connections LO 13.1 Define key terminology in digital marketing and understand the nature and importance of customer connections.

Trends in Digital Marketing The Advent of Consumer Digital Culture Omnichannel Marketing The Rise of Mobile Online Reviews: The New Word of Mouth Brand Communities LO 13.2 Identify and understand trends in digital marketing.

Social Media in Digital Marketing Strategy Setting the Stage: The Social Media Environment Connecting with Customers Using Social Media Trends in Social Media LO 13.3 Explain social media and their place in digital marketing strategy.

Other Digital Media Used in Marketing Strategies Company Websites and Website Strategies Evolving Email Communication Understanding Mobile Marketing Quantified Self and Tracking Trends LO 13.4 Outline the basics of other digital media available to use in digital marketing strategy.

Chapter Introduction This chapter looks at digital marketing and the ways in which brands can connect with customers. Customers increasingly demand more control with communication and how they want to connect with the brand (and other customers).

LO 13.1 provides an introduction to digital marketing and connecting with customers.

Next, in LO 13.2, we examine developing trends in digital marketing. In LO 13.3, we focus on social media. Finally, in LO 13.4, we look at other digital media used in marketing strategy.

Present the Industry Expert video to the class in which Cher Jones from Socially Active offers many insightful examples about how digital marketing is changing. This is a useful opening to discussions.

Industry Expert Video Cher Jones, Socially Active Please note: Video Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-choice Questions 1. What is a part of doing business according to Cher Jones? a. using all digital channels b. social media as the sole digital tool c. traditional marketing tactics d. the personal brand 2. According to Cher Jones: asocial media is a part of digital marketing. b. social media is the same as digital marketing. c. the definition of digital marketing is social media.

d. digital marketing is social media plus traditional marketing 3. What is the most effective part of digital marketing according to Cher Jones? a. omnichannels b. the human touch c. social media d. analytics 4. What is a swipe file according to Cher Jones? a. the best content online b. viral content c. content that you stop scrolling through d. influencer content Discussion Questions 1. Why do personal brands matter according to Cher Jones?

2. What is included in digital marketing?

3. Why are swipe files important to pay attention?

Customer Connections in the Age of Digital Marketing LO 13.1 Define key terminology in digital marketing and understand the nature and importance of customer connections.

The key to marketing success in the digital age is to use technology to encourage customers to connect with brands and not simply for brands to connect with customers.

This is a critical distinction. These connections are evolving beyond merely providing content to consumers and asking them to comment on it. Instead, marketers use technology to enhance the connections between consumers and brands and connections among consumers.

Defining Digital Marketing, Digital Media, and Digital Media Tools Digital marketing is the strategies and tactics of communicating with customers or delivering benefits to customers using technology. Digital marketing is largely based on the internet.

Digital marketing generally occurs through digital media. Digital media are the technologies and platforms that facilitate communication with customers and delivery of benefits to them. For example, websites, email, text messaging, search engines, and social media platforms are all digital media. Each form of digital media allows for the use of one or more digital media tools.

Banner advertisements are simply advertisements placed in a limited space on a website, much as a newspaper ad appears on part of a newspaper page.

Display Figure 13.2 ―Traditional Media versus Social Media Communication Patterns.‖ As illustrated in Figure 13.2, the immediacy and interconnectedness of digital media makes the very nature of digital media strikingly different than traditional media. The one-way communication of traditional media has been replaced by multiple flows of information in multiple directions at once, which in turn has reshaped how marketers connect with customers, how customers connect with marketers‘ brands, and even how customers connect with each other. Ask the class to describe their interaction with a shopping site like Amazon.

The Meaning and Importance of Customer Connections Customer connections are the accumulation of meaningful behavioural, social, and psychological contacts between people and brands and among people interacting about brands. Note this broad perspective implies three specific components to customer connections— behavioural, social, and psychological.

Display Figure 13.4 ―Components of Customer Connections.‖ Review the example presented in the textbook—a person visits a friend and watches TV on her friend‘s new

Sony television. Impressed with the vivid picture, she grabs her smartphone to visit Sony‘s website for information about different models. The website helps her locate several retailers who carry Sony televisions. She visits the retailers‘ websites to compare prices, posts a question about delivery and setup, reads some reviews of the product, reads the responses to her questions, and then places an order, pays for it, and arranges delivery and setup. Each step in the process pertains to one or more of the three components of her growing connection to Sony. Ask the class to use another example to highlight the behavourial, social and psychological components.

Why Customer Connections are so Important to Digital Marketing Strategy The preceding example should offer you clues about the importance of customer connections to digital marketing strategy. As our customer in the Sony example began to build her connection to the Sony brand, Sony‘s digital marketing strategy had to anticipate where she might go to find information and then influence her purchase decision. After the purchase, Sony‘s strategy had to incorporate tactics that maintained and grew the customer‘s connection to the Sony brand through all three components of her connection. Sony‘s marketing department had to use digital media tools to strategically and tactically respond to the customer‘s needs. Different tools have different uses in building connections.

We can distill this example down to a few insights that explain why customer connections are critically important to marketers in the digital age.

First, customer connections involve the co-creation of value. Customers who are engaged with the brands they buy receive value not only from using or consuming their purchases but also from communicating with others about their experiences. In other words, marketers and customers create value for each other. Ask the class what value was gained—specifically in the Sony example and in the other examples offered earlier by the class.

Social proof is a psychological concept that means people look to the actions of others for clues about acceptable behaviour. Firms strategically use reviews and customer recommendations on their websites to generate social proof that other customers like their products.

Second, digital media accelerates the formation of customer connections. As consumers interact more with brands and other consumers, they think of purchases and brands far more frequently. Consumer psychologists refer to this phenomenon as polysynchronous consumption, or the near constant integration of brand information to and from peers and brands themselves through multiple channels of communication. Display and discuss Figure 13.6 which illustrates the idea of polysynchronous consumption in a digital environment. Ask the class to use a specific example of another consumer product.

Third, customer connections cultivate a psychological connection of brand loyalty. The

pinnacle of brand loyalty for many companies is having consumers consider the company‘s brand to be a lifestyle brand. Lifestyle brands are not just consumed; they are showcased, shared, and spoken about. Lifestyle brands become part of a customer‘s selfconcept. Ask the class to identify their lifestyle brands and how the digital marketing has nurtured this phenomenon.

Discuss the ‗Ethical Dilemma‘ feature included in the text: You work for an online gaming company with a handful of small, but profitable games that are available on different platforms. Though your company is profitable, you have not been as successful as some other companies and have never had a breakout game that draws high numbers of players and makes the company a lot of money. You and the other company owners spend a lot of your free time playing your own games and interacting with other players and one of the main efforts is to try to improve your existing games and develop ideas for new games. One of your main games is a space game in which players battle each other in space with different ship/weapon combinations. While playing one evening, you are chatting with another player who says she has to take a break to go grocery shopping. She makes an offhand comment that she hates going to the grocery store and wished she could instead fly through the store in her space fighter and blast the shelves, which would be way more fun than shopping. After she logs off, you begin thinking…space ships attacking grocery stores and shooting up shelves…hey, what if we combined our game with grocery shopping and make grocery shopping an online game? You work through some details with your team and take the idea to a local grocery chain that already takes online orders and delivers. Your idea takes off and makes a lot of money. Ask the students if they think that some of the money earned should be shared with the gamer that provided the initial idea. Would the answer be different if the idea came through a company ―idea box‖? What is the ethical responsibility for ideas and who decides when, what, and how much should be shared?

Author Podcast 13.1 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. One of the advantages of successfully engaging customers through digital media is: a. customer loyalty b. ability to access personal data c. ability to learn more about the market through surveys d. reduced advertising budgets 2. Once a customer is engaged on social media, it is important for the marketer to: a. gather information that will help with the next sale b. listen to what the customer has to say and respond appropriately c. learn what form of advertising the customer prefers d. mention the company‘s entire product line 3. No matter what the advertising channel is, savvy brands will:

a. ask for repeat business b. tell the brand story c. guide the customer to the brand’s social media sites d. offer price incentives 4. The goal for marketers of continuing the conversation with customers is: a. to learn who the customer is b. to ask for repeat business c. to ensure that the customer understands the product benefits d. to offer other, similar products in the company‘s product mix Discussion Questions 1. According to Andrew Loos, what are the benefits to a brand of successfully engaging customers? What other benefits are there?

2. How might a brand engage its customers in a conversation? What form would it take?

3. Why is it important to respond to any comments made by the customer?

13.1 Concept Check Question 1: Is creating customer connections more important to marketers today than it was before digital marketing? Why or why not?

Answer 1: Creating customer connections has always been important to brands and marketers, but now, due to the prevalence of social media, the social component of the customer connection is magnified to a greater degree than ever before. Whereas the social component of the customer connection was once limited to word-of-mouth, social media has given just about any customer the ability to communicate with others. Additionally, digital media accelerates the formation of customer connections and therefore, customers think of brands and products more frequently.

Question 2: Should marketers focus on one type of customer connection more than others?

Answer 2: Focusing on one type of customer connection can be a little short-sighted. The pinnacle of brand loyalty is for consumers to consider a brand a ―lifestyle brand‖ which indicates deep behavioural, social, and psychological connections. When a brand becomes a lifestyle brand, consumers not only purchase and consume the brand, but showcase it, share it, and evangelize about it. Without achieving connections in all three areas, this is not a possibility.

Trends in Digital Marketing LO 13.2 Identify and understand trends in digital marketing.

Using digital marketing tools to connect with consumers and the increasing use of social and digital tools for more and more activities have given rise to consumer digital cultures.

The Advent of Consumer Digital Culture Consumer digital cultures are defined as the points of intersection and interaction that occur between people in their roles as consumers and digital media in their roles as channels of brand information. Display Table 13.1 and discuss the highlights of several characteristics of the consumer digital culture relevant to marketers. Ask the class if they agree with these characteristics and if they would add any others.

Omnichannel Marketing Digital media are spurring the evolution from multichannel marketing to omnichannel marketing. Omnichannel marketing utilizes the interconnected and interactive nature of digital media to create a seamless messaging experience targeting consumers no matter what digital media they‘re utilizing at a given moment. Present examples and ask the class for others. Omnichannel marketing can be particularly effective for businesses with a physical presence, and it helps businesses build brand awareness and loyalty, as well as drive customer engagement and sales. Review the examples of omnichannel marketing given in the chapter.

The Rise of Mobile People have increasingly adopted mobile devices for more daily activities, thanks to several important developments including more capable phones, faster data transfer speeds, and lower costs of use. However, marketers are only now beginning to tap the potential of mobile connectivity. Display Figure 13.9 and ask the class to explain the growth in digital media usage. Review the characteristics of the consumer digital culture with respect to the company Amazon. Why has this happened and what does that mean for marketers‘ choices when selecting advertising and other communications efforts.

Online Reviews: The New Word-of-Mouth Digital media has transformed the concept of word-of-mouth through the explosive growth of online reviews. These reviews provide marketers and consumers alike with an immense source of brand information. Like traditional word-of-mouth, online reviews

carry with them high levels of credibility, which is essential to building or maintaining brand trust. Interestingly, consumers under age 35 trust online reviews even more than the opinions of friends and family. Table 13.2 summarizes recent research on the value of online reviews. Present Table 13.2 and discuss the statistics. Ask the class to offer explanations for these findings.

The extensive use and high credibility of online reviews has four implications for marketers. First, marketers should invest in monitoring and encouraging positive online reviews. Second, companies should collect and analyze the data from online reviews.

Third, the company should develop a response strategy for negative reviews. Fourth, the company should set objectives for online reviews both in terms of content and in terms of star ratings. Like all marketing activities, managing online reviews works best when done with outcomes in mind. Ask the class what those outcomes should be for a specific company.

Brand Communities Customers who feel strong connections to certain brands frequently enjoy communicating with each other about their experiences with the brands. These interactions, which build upon the social component of customer connections, can evolve into brand communities, which we define as groups of consumers united by strong connections with a branded product or service.

Display Figure 13.10 ―Framework for Brand Community Development‖ and discuss illustrative examples of the framework provided in the textbook and others presented by students.

Author Podcast 13.2 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Andrew Loos says that mobile marketing is still in an early stage, since right now if often consists of: a. banner ads b. SMS messages c. links d. ads that interrupt games or other mobile apps 2. Loos says that the ultimate gift from a consumer is: a. a purchase based on a mobile ad b. going to the company‘s website c. that person’s mobile number d. that person‘s email address

3. To entice customers to provide their mobile number, Loos predicts that companies will need to: a. engage in more gamification b. offer greater incentives c. give discounted prices for products d. provide greater guarantees of privacy 4. A risk of mobile marketing is that: a. it is too easily ignored b. it will feel like spam email c. it will overtake other forms of digital marketing d. it will cost marketing jobs Discussion Questions 1. How do you feel about mobile ads in their current forms? How could they be improved?

2. What do you think Andrew Loos means when he says marketers will need to offer ―Easter eggs‖ in mobile marketing?

3. Do you agree that the goal of mobile marketing is getting a consumer‘s mobile number?

Mini Case 13 Question 1. Are you surprised by the fact that the second-leading cause of death in people 10–29 years old is suicide? Why or why not?

Answer 1. Student answers will vary and will depend on personal situations.

Question 2. Why do you think it is so difficult to talk about suicide?

Answer 2. Many ideas may exist for students‘ answers. The negativity of suicide, acceptance by others, the personal nature of one‘s thoughts, fear of making suicide seem more real, and the responsibility to help those contemplating suicide are factors that make discussing suicide difficult.

Question 3. What is the marketing purpose of the ‗Hope in the Darkness‘ walks?

Answer 3. The marketing purpose is to bring awareness to mental health and give people someone to reach out to if help is needed.

Question 4. Can you suggest other options in addition to the ‗Hope in the Darkness‘ walks to engage local communities?

Answer 4. Students will have many ideas on what could be done including activities they may have seen and new innovative ideas they have.

Question 5. What other products or services can you come up with that have similar difficulties with respect to marketing? What do they do differently that Hope in the Darkness could perhaps copy effectively?

Answer 5. Students examples will vary. Many non-profit organizations struggle with raising awareness of issues. The space to raise awareness is very competitive even though each cause is worthy. Partnering with a larger organization such as a bank is an effective strategy to reach more people.

13.2 Concept Check Question 1: The rise of the consumer digital culture was listed as the first trend in this section. How does the consumer digital culture affect the other trends?

Answer 1: The advent of digital media has initiated the evolution from multichannel to omnichannel marketing in that omnichannel marketing relies on the interconnectedness and interactive nature of digital media to create a seamless messaging experience that targets consumers, no matter the digital media they are using at a given moment. Digital media has also made a home in the rise of mobile marketing—that is, consumers using their mobile phones for more daily activities, and marketers being able to connect with consumers where consumers are spending their time. Last, digital media has birthed online reviews, which is the new word-of-mouth.

Question 2: How do the other trends amplify the consumer digital culture?

Answer 2: All of the trends—starting with, and affected by, digital marketing—can be married into a polysynchronous brand community, which is defined as groups of consumers united by strong connections with branded products or services. Brand communities have existed before digital media, but are amplified now, due to effective and accessible frameworks upon which they are built.

Social Media in Digital Marketing Strategy LO 13.3 Explain social media and their place in digital marketing strategy.

Social media is fast becoming the mainstay of digital media and may soon overtake traditional media advertising in terms of consumer usage and marketing investment. We begin by defining social media as the websites and software applications designed for users to create and share information and ideas through networks of contacts they develop with other users. Within the world of social media are numerous social media platforms, which are the specific named sites or applications accessed by users. Social media platforms include Facebook, Instagram, Twitter, Snapchat, WeChat, Weibo, and QQ. Display Figure 13.13 ―Leading Social Media Platforms‖ and ask the class to explain their orientation for users and which they prefer using.

There are many ways to categorize social media platforms, but in general, there are six different types. Display Table 13.3 ―Categories of Social Media Platforms‖ and review each category.

Connecting with Customers Using Social Media As social media has grown, it has not always been obvious how marketers could use the various social media platforms to connect with customers. In part, this is because marketers are just now gaining a more accurate understanding of internet users‘ online activities. Social media represents a sort of middle ground between passive, traditional mass media advertising, such as TV or print, and live, in-person marketing, such as personal sales, live product demonstrations, or special events.

Display Table 13.4 ―Principles of Marketing through Social Media‖ and review these items that can help guide marketers. Ask the class if they have other principles they think should be included.

Trends in Social Media The evolution of social media has significantly changed consumer, marketer, and brand roles. However, social media is rapidly changing, and we discuss five trends affecting marketing practice.

Trend One: Companies will turn to their own employees to improve social media reach.

Companies use employees as dedicated social media teams and encourage staff to share up-dates about their businesses and brands.

Trend Two: Instant messaging is becoming the next big thing in social media.

Messaging is already emerging as a key channel for one-on-one social customer service.

Trend Three: Technology will become increasingly immersive. For example, video may soon become as common as text, especially live video.

Trend Four: Influencer marketing strategies will be revived through social media.

Before the days of social media, marketers would attempt to cultivate so-called opinion leaders to act as brand ambassadors to influence the purchase decisions of others. In the era of social media, this approach is creating a new and more influential type of opinion leader.

Trend Five: Content marketing will play an increasingly significant role in building and maintaining brands. Content marketing involves creating and sharing videos, podcasts, and other media to attract, engage, and retain customers. Storyboarding maps out the story the marketers wants to tell and ensures content is effective (relevant, informative, entertaining, interesting (fun), and consistent with the brand‘s identity and personality).

Author Podcast 13.3 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. The greatest benefit of social media marketing is: a. ease of reaching target customers b. feedback about what people think of the brand c. the low cost of this form of advertising d. it shows that the company is current 2. Millennials, in particular, appreciate social media marketing because: a. it is an easy way to get information about products b. social media marketing often offers incentives to customers c. they want to know the brand in the same way they know another person d. they want to be able to access information on any device 3. Engagement by potential customers means: a. maintaining a conversation with a brand leading up to a purchase b. giving and receiving a large number of ―likes‖ c. willingness to provide product reviews d. willingness to order frequently 4. On the practical side, it is important that companies measure the success of their social media marketing efforts by: a. using key performance indicators b. analyzing the data they receive from customers c. tracking sales made via social media d. tracking ―likes‖ Discussion Questions 1. In addition to feedback, what are some of the advantages mentioned by Jasmine Bina of marketing via social media?

2. What does Bina say about why millennials like social media marketing? Do you agree with her analysis? If not, why not?

3. What are the practical considerations of social media marketing (i.e., how does a company judge if its efforts are successful)?

13.3 Concept Check Question 1: Consider your own social media use. Do you think that the marketing efforts you see on your social media accounts are well targeted?

Answer 1: Answers will vary based on student experience. This question lends itself well to an interesting classroom discussion, as some will say that yes, their social media accounts seem to be well targeted, and others may feel completely differently. Ask students about why they think their targeted ads are accurate or inaccurate; is there a commonality between those who say they see well-targeted ads versus those who do not?

As an example: social media targeted ads seem to be more well-targeted for people who do more online shopping than those who don‘t, and for those who interact with brands via social media. Some social platforms seem to better at targeted ads than others: for example, some may note that Facebook ads are not as accurate as ads on Instagram, or vice versa.

Question 2: What will social media be like when kids being born today start using it?

How will social media compare to the platforms you use now?

Answer 2: Responses will vary between students; however, most should reference technological advances as informing trends of the future. With increasingly immersive technology becoming more popular and driving trends, it is likely that social media of the future will rely more heavily on live video, as opposed to being as text-based as it currently is. Other aspects of emerging tech trends include virtual reality, drones, and 360-orb cameras. Discussion around students‘ imagined social media of the future can create a lively classroom discussion.

Other Digital Media Used in Marketing Strategies LO 13.4 Outline the basics of other digital media available to use in digital marketing strategy.

In this section, we discuss several important types of digital media apart from social media.

Company Websites and Website Strategies Company websites remain the most central tool for digital marketing. Unlike social media sites, which usually impose restrictive, prescribed formats on users, company websites are completely under the control of the organizations that own them. Companies control the look and feel, content, functionality, and data. As a result, many marketing efforts on social media are designed to eventually drive users to the company website.

Well-designed company websites possess several characterizes that relate to marketing strategy: 1. A company‘s website should embody the image of the company‘s brand(s).

2. Company websites must be easy to use and navigate.

3. Websites should also be accessible in mobile formats since digital access increasingly occurs through smartphones.

4. Company websites should link with social media platforms.

Search engines are websites that use algorithms and databases of web content to match a user‘s keywords or search terms with websites that may be relevant to those terms.

Google is by far the world‘s leading search engine.

Companies that don‘t pay for so-called sponsored links must engage in a tactic referred to as search engine optimization or SEO, which is the practice of optimizing websites and webpages to get listed as close as possible to the top of the search engine results page.

Companies that are successful at exploiting the search algorithms find the links to their sites moving closer to the top of the search results. Display Table 13.5 and review the list of some useful SEO tips.

Evolving Email Communication Commercial email is simply an electronic message that is promotional in nature and often contains some incentive to respond. Email introduces several marketing capabilities including the ability to initiate two-way communication, the ability to distribute information and offers quickly, the ability to provide nearly immediate feedback, the

ability to reach vast worldwide audiences; and its low cost. Ask the class to discuss their experiences with corporate email - what they liked and disliked about email. For example, is volume a problem?

Understanding Mobile Marketing The dramatic increases in the amount of time consumers spend on mobile devices presents immense opportunities and challenges for marketers in the emerging area of mobile marketing, which is the practice of reaching and engaging consumers with marketing information through mobile devices, primarily smartphones. One huge strength of mobile marketing is the ability to reach consumers with relevant messaging when and where they may be receptive to making a purchase. This strength comes from location-based capabilities built into smartphones that utilize cellular and global positioning (GPS) data to pinpoint the location of mobile devices in real time. Ask students how they interact with mobile marketing strategies.

Mobile marketing relies on three primary tools to reach and engage customers. First are mobile push notifications, which proactively send offers and information directly to consumers through texts, instant messages, or email. Second is the mobile display ad, which works in many ways like banner ads on other digital platforms. Third are mobile apps, which are programs offered by companies that consumers can download and install on their mobile devices. The idea behind mobile apps is to offer some functionality or added value in the program that entices users to download and install it. Once installed, mobile apps tangibly connect consumers and brands as they serve as a focal point for repeated communication and interaction. Ask students how they interact with mobile apps.

Review the article ―Do Influencers Affect Your Purchasing Behaviours?‖. Ask students how they feel their purchases are affecting by influencers. Discuss examples of companies that use influencer marketing to promote products.

Discuss with students the ‗Applied Metrics‘ feature included in the chapter: have you ever clicked on a link to respond to a digital marketing offer? Whether you do or don‘t respond to digital marketing offers, someone is tracking your behavior, trying to measure the performance of the specific marketing tool being used. Often digital marketing includes an offer and a way for the potential customer to respond, such as clicking the link to visit the company‘s website to perhaps learn more about a product and ideally purchase. Companies will often try different offers to determine which offer is more likely to entice customers to respond to the offer. Marketers measure the clickthrough rate to determine the effectiveness of a digital offer. The clickthrough rate measures how many people actually click on the offer and are usually directed to the company website for more information, out of the total number of people that received the digital offer.

Clickthrough rate (CTR) is calculated as a percentage as follows: Clickthrough rate (CTR) = (Number of customers who click on the digital offer ÷ Total number of customers who received the offer) x 100 to get the percentage.

Assume you are an intern working for a company trying to evaluate two different digital offers. Option 1 was a mobile ad with a product description and a discount code received by 1000 people on their mobile device. 20 people clicked on the ad to get the discount code and were forwarded to the company‘s website, landing on the product page containing more product information. Option 2 was a short video that had an embedded QR code that also linked to the same product page. 50 people scanned the QR code out of the 2000 that received the video link. Review with students the calculation of the clickthrough rate for both options.

Number of people who responded Total number who received offer Clickthrough Rate (x 100 for %)

Option 1 Ad + Dicsount code Option 2 Video +QR code 20 50 1000 2000 2.00% 2.50%

Ask students which of the options they think the company should use in the future.

Quantified Self and Tracking Trends Digital and mobile technology has also spawned new products that can be effectively used for marketing such as Apple Watch, a Samsung Gear, and Fitbit. Quantified self and tracking movement uses technology to measure all aspects of our daily lives such as eating and exercise activities. Ask the class if they use any devices or if they would like to have one that would monitor some activity in their lives.

Author Podcast 13.4 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. A caveat voiced by Jasmine Bina about mobile marketing is: a. consumers prefer other forms of marketing b. it is difficult to identify your target customers through this marketing channel c. consumers often just ignore this type of marketing d. just because you can do it on the phone doesn’t mean you should do it on the phone 2. A good rule of thumb for marketing strategy is: a. use the strengths of the channel b. stay within your budget c. decrease the amount of marketing done via TV d. use face-to-face interaction whenever possible 3. 360 video is a type of: a. VR b. animation c. streaming video d. holographic video 4. Jasmine Bina mentions Disney‘s use of 360 video to advertise:

a. ―Frozen‖ b. ―The Jungle Book‖ c. ―Ralph Breaks the Internet‖ d. ―Christopher Robin‖ Discussion Questions 1. According to Jasmine Bina, is mobile marketing likely to increase over the next 2-3 years? Why? 2. What are some caveats she mentions about mobile marketing?

3. Are applications like 360 video likely to be successful when used in a mobile marketing effort? What is necessary to ensure their success?

13.4 Concept Check Question 1: Which types of demographic groups will find which types of digital media most attractive?

Answer 1: Email may be more appealing to older consumers—and likewise, considered by younger consumers to be boring, old-fashioned, or inert. Mobile marketing strategies that use location-based capabilities, mobile push notifications, and ads that can be tailored specifically to be delivered when a consumer (who has a mobile device) is in a specific place at a specific time, may be attractive to less tech savvy consumers. New digital tools such as quantified self and tracking products often appeal to those more tech savvy or comfortable with technology, which in many cases is younger consumers who are at ease shopping online at the touch of a button.

Question 2: Do you think that the number of digital media options available to marketers today will increase or decrease in the future? Which ones will fall by the wayside?

Answer 2: It is likely that as technological advances continue forward, so will digital marketing. It is unlikely that digital media options will diminish in availability to marketers since they have become so engrained in our current consumer climate. Email is probably the most likely to become an archaic form of marketing, though it‘s ease and relatively minor expense will probably mean it will not disappear entirely—at least in the immediate future, in the same way that snail mail (mail delivered by post) has become less important to marketers, but still exists.

Application Questions Question 1: What is customer engagement? Why are social and digital media particularly good at developing it?

Answer 1: Customer engagement is the interaction between consumers and brands, and also consumers and other consumers, regarding a particular brand or product. Social and digital media are great tools for developing this because they encourage a deep level of connectedness and communication. Combined with the way some platforms are designed to be used, social and digital media are great at facilitating steered communications and connections centred wholly on a brand or product.

Question 2: Analyze a recent digital marketing campaign that you encountered. How did it utilize both digital and social media to create and effective and engaging customer experience? Reflect on its impact on your perception of the brand.

Answer 2: Student answers will vary as they consider both the digital media (the umbrella term that encompasses technology and platforms that facilitate digital communication) and social media (a type of platform within digital media that allows consumers to communicate and forge connections with the product).

Question 3: Considering the three components of customer connections, share a personal experience where a brand‘s digital marketing efforts significantly impacted your relationship with the brand. What did they do right, and what could they have done better?

Answer 3: Student answers will vary but should consider the three components of the customer connection: behavioural, social, and psychological. Students should comment on the success or lack thereof of the company‘s marketing efforts.

Question 4: Describe the six basic types of social media sites. Why might these classifications be of use to marketers in different product markets?

Answer 4: Social media sites are usually in the category of one of the following: social networking or relationship sites, social publishing platforms, bookmarking sites, mediasharing networks, online review sites, and interest-based networks. Understanding the difference between these types of categorizations can be beneficial to marketers so that they can effectively and appropriately apply the principles of marketing in social media through channels. For example, an online review site like Yelp would be an ineffective way to market something like a luxury good, which could potentially be better served via marketing initiatives on a social networking site or even a bookmarking site or interestbased network.

Question 5: Reflect on the importance of search engine optimization in today‘s digital marketing landscape. How has it influenced your own decision-making process as a consumer, and what implications does this have for businesses striving for online visibility?

Answer 5: SEO is the practice of designing websites that exploit search engine properties to get a particular website as close to the top of the results page in a search as possible.

This is usually done by using complex algorithms that match websites to search terms in hopes of delivering the most useful results to users. SEO allows businesses to target specific keywords or phrases, provides a sustainable, cost-effective marketing strategy, and helps enhance brand recognition. Students should consider how search engine optimization has impacted their personal decision-making.

Question 6: How do social media provide data about customers? What tools does social media provide for understanding these data?

Answer 6: Companies can learn more about their customers in a variety of ways with social media tools, including sophisticated research tools like Google Analytics, Twitter Analytics, and Facebook Insights, among others. These types of tools can uncover a wide variety of information about consumers, including location, demographics (age, gender, race, marital status, etc.), consumer behaviours (frequency and type of purchases), what time of day is most heavily trafficked on social media sites, and even how long a consumer is spending on a specific page and where they track from there.

Question 7: What is consumer digital culture, and how does it affect consumer behaviour and consumption in real-world environments?

Answer 7: Consumer digital culture is the points intersection and interaction that occur between people in their roles as consumers and (in terms of digital media) channels of brand information as it is relevant to marketers. Consumer digital culture is information rich, consumer-centred, omnipresent, interconnected, and personalized. When looking at consumer digital culture separately, it can affect consumer behaviour and consumption in the real-world environment because consumers are more knowledgeable and connected than they may have been previously. They are self-focused and conscious of their own needs and are therefore receptive to brands/products that address those needs. It has also impacted who is part of this digital culture in that technology is used by more and more people, including older consumers, who were previously viewed as being outside of digital culture.

Discussion Questions Question 1: Will digital media eventually replace traditional media? How can marketers use digital and social media together to build customer connections?

Answer 1: It is likely that at some point, traditional media will be virtually obsolete, especially as business owners and marketing managers become people who have grown up without reliance on traditional media. The likelihood that traditional media, especially television ads, will altogether vanish is not high, although it may evolve to be more applicable to the culture it resides within (e.g., ads on streaming services like Hulu or Netflix, as opposed to cable and network television).

Question 2: How do digital media inhibit marketer control over brand messaging?

How can marketers maintain some control in the digital marketing environment?

Answer 2: Digital media—especially the social aspect of it—has taken some of the control away from marketers in that with the increasing interconnectedness and communication between consumers, talk of the brand is left to them. This can be helpful in many cases, especially with happy customers who are supportive of a lifestyle brand.

Marketers can assert some control in the digital marketing environment by suggesting or offering up ideas around the way communities can coalesce, but ultimately the brands that attempt to tightly control brand messaging within consumer communities see negative repercussions, especially as consumers are becoming savvier and savvier to identifying this control.

Question 3: How can marketers use the components of customer connections to their brands to encourage customers to regard the brands as lifestyle brands?

Answer 3: A lifestyle brand is the result of brands achieving deep and strong connections with consumers reflected in behavioural, social, and psychological components, and integrated into one or more aspects of the consumer‘s life. Marketers can encourage consumers toward regarding their brands in this way by promoting events and clubs that centre on their product. This can encourage and facilitate consumer interaction, which in turn impacts social and psychological connections on a very real level.

Question 4: Think about developments such as omnichannel marketing and mobile marketing. With all of the data that is being collected about customers, what ethical issues arise from the use of this technology? Are marketers responsible for resolving these ethical issues?

Answer 4: Developments like omnichannel marketing can bring about concerns over privacy and location/tracking. Ads that may be emailed to a consumer regarding something they briefly viewed on a brand‘s website may be beneficial in some ways to the consumer, and certainly to the marketer/brand, but can cause concern to consumers, especially as technology advances and this type of tracking and targeted advertising becomes increasingly prevalent and advanced. One could certainly argue that marketers are responsible for resolving these ethical issues, however it could also be said that the onus for addressing this is on those responsible for developing this type of technology.

Ultimately, marketers and their brands are the face of these ethical issues and any change

will likely need to be ushered in by them.

Question 5: How can marketing managers with complex social media strategies make sure that brand messaging stays consistent? What can cause the messaging to become inconsistent?

Answer 5: Message coordination is key to the consistency of brand messaging. For marketers using a variety of platforms in their social media strategy, it is of the utmost importance to ensure language and images used are similar or in the same vein, and that if tools such as social media influencers are used, there is a specific, almost templated format that is being used to showcase products or brands. Inconsistency can occur when marketers relinquish too much control, which can be a slippery slope because messaging that is too carefully controlled can have negative repercussions. This idea of control and consistency in messaging is essential to the social media marketing conversation and is certainly a balancing act. Classroom discussion about ways in which marketers can establish control or consistency and asking students for good and bad examples of consistency in messaging can elicit great conversation.

Question 6: Pick any of the companies you follow and choose an example of what you think is an effective social media communication and another from the same company you think was not effective. Be prepared to discuss your justification for effectiveness with your classmates.

Answer 6: Answers will vary. An example could be something like the website Expedia.com that is used to book flights for an upcoming vacation. A good thing it did was provide targeted ads and email suggestions of restaurants and hotels that were in the city to which the consumer flew, and a bad example would be offering return flights via email marketing and targeted ads several days after returning home from the trip. The likelihood that a traveller would be flying back to the same city (especially one very far away) immediately upon return from a trip is not good. Another example that may be used is in Amazon‘s messaging social media marketing that suggest restocking or repurchasing an item that was recently purchased through the site. For things like laundry detergent or diapers this replenish suggestion makes sense, for other larger items that are not typically repurchases—especially so soon after initial purchase—like shoes or televisions or furniture, this type of ad does not make sense.

Question 7: It is becoming more common for companies to monitor social media and other digital posts. Some companies have also been accused of ―seeding‖ a website or board, planting their own posts to make the company look better. Find an example of a post you think could have been made by someone from the company that did not identify the poster as working for the company. Discuss whether you think this is ethical and appropriate.

Answer 7: Examples of course will vary, but one example of this that was identified by

communities on the popular social media site, Reddit, was in regard to a beauty brand called Sunday Riley, which has seemed to establish a cult following and has thousands of positive reviews on review sites like Sephora.com. An anonymous whistle blower made public an email that circulated in the company before the launch of a new product that encouraged employees to create multiple profiles and post effusive praise in reviews on Sephora. The email went so far as to suggest specific verbiage to use in the reviews that would align with the company‘s own consumer-facing marketing. When it was revealed that this happened, consumers were upset—some vowing to not buy from the company again due to how unethical this was, but others seemed to be less concerned because the products were effective for them to a degree. This aspect of either viewing something like seeding as unethical or okay seems to be closely associated with consumers‘ views of the brand—if a product is looked upon favourably by a consumer, they may be less likely to be bothered by seeding than for a consumer who does not have a favourable opinion of a product.

Question 8: While there are many benefits to digital marketing, what are some of the key challenges that marketers face in using it?

Answer 8: Digital marketing is new and quickly changing, and companies have to learn how to effectively use it as well as how to adapt. Digital marketing requires human, time, and money resources. Monitoring is key to ensure a positive image of the brand.

Customers are online 24/7, and companies are not. This makes digital marketing harder to manage. There are also so many tactics of digital marketing, and it‘s difficult to manage them all.

Question 9: Discuss the role of quantified self and tracking in creating personalized digital marketing experiences. Share an example of how data from your own personal tracking devices or apps has been utilized by a brand to tailor their marketing efforts toward you. Reflect on the ethical considerations surrounding the use of such data.

Answer 9: By using data from self-tracking devices, companies can create an understanding of the user and then specifically target the user with certain products or services the user might benefit from. Students may share different examples, such as a fitness tracker that monitors daily activity levels, followed by targeted marketing for workout tips. Ethical considerations include data privacy and data security. At a minimum, companies could consider having user informed consent or an opt-out ability.

Question 10: How has polysynchronous consumption impacted the way you interact with brands and advertisements across multiple devices? Share a personal experience where a brand successfully or unsuccessfully managed this consumer behaviour and discuss the implications for digital marketing strategies.

Answer 10: Student experiences will vary. Most students will have experience in using multiple devices and seeing different ads that have them clicking to various websites.

Retargeted ads will aim to remind users of products/services they have looked at and aim to ensure users follow through and make a purchase. Companies should ensure that they

are able to cross-device track, that their ads are meant for different devices, and that their advertising has consistent branding.

Running Case This Saves Lives (TSL) Video Please note: Video Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-Choice Questions 1. Ryan describes the TSL team‘s use of social media to: a. develop a new flavour b. initiate a fundraising campaign c. announce a partnership with Starbucks coffee d. create awareness of the problem of hunger in Africa 2. He says that using social media allows TSL to: a. build brand awareness b. create a customer loyalty program c. compete with the big dogs d. broaden their customer base 3. Ryan says they have built an online community by: a. extensively advertising in other media b. holding events in selected communities c. doing demos in Starbucks locations d. providing quality content that appeals to their customer base 4. The celebrity who is part of the TSL team is: a. Ellen DeGeneres b. Kristen Bell c. Stephen Curry d. George Clooney Discussion Questions 1. Recall that Jasmine Bina talks about establishing a conversation with social media.

How is TSL‘s use of social media to determine the next new flavour an example of creating a conversation with customers? What are the parts of the conversation?

2. Ryan says that using social media allows a small company like TSL to compete with much larger companies, but what steps must they take to maintain their engagement with a community of customers?

3. How has having a celebrity spokesperson helped the company grow?

Running Case This Saves Lives (TSL) Questions Answers might include the following: 1. Does the strategy to target website visitors with a discount seem like a good idea? Why or why not?

Offering a discounted price during the holiday season is a good idea and is likely to motivate purchases, but the downside is that once customers have bought at the discounted price, they may expect to be able always to purchase at the lower price. So, this offer should be communicated as a temporary, holiday offer.

2. Why do you think TSL only focused on people who had visited its website within the last 30 days? Would you have done something different?

Two possible reasons are (1) that people who visited the website recently are more likely to respond because they have demonstrated recent interest in the product; and (2) that limiting the focus may make the results more manageable in terms of numbers. Also, note that visiting the website shows at least a minimum level of interest, possibly even desire for the bars. TSL could be targeting only those who had visited the website, but who had not purchased bars. TSL would be testing whether a slight adjustment of value by offering the discount would then encourage a trial. Then the hope is that customers who try the bars like them well enough to buy again, even at regular price, and become repeat customers.

3. Is 13,335 impressions a good outcome for spending $1,549? Explain.

The purpose of this (and the following) question is to get students to think about the outcomes of the promotion. More specifically, did the promotion work, and how would TSL tell if it worked or not? This is a good time to remind students that all marketing resource expenditures should be viewed as investments and should be considered based on their return. This is also a perfect spot to let the students know that Chapter 13 will address the measurement of marketing effectiveness more explicitly, but this will serve as an introduction.

In this case, TSL had 13,335 impressions after spending $1,549. This ends up costing them $1,549 cost / 13,335 impressions= $.116 per impression or $116 per thousand impressions (CMP). This is extremely high compared to most reports that suggest CPM for something like this campaign should be much cheaper. Typical CPM for Facebook ads is around $10. Instagram is closer to $5. Other cost influences include formats, timing, message details, etc. While these estimates are not as critical at this point for principles students, instructors should point out that unless you have a) a specific goal in mind – 5k impressions, 10k, 15k, etc. and/or CPM of $3, $20, $100, you can‘t actually tell whether something works as well as intended. At a minimum, TSL should begin measuring and tracking results so they can compare their marketing activities to see which activities perform best for achieving different goals. Indicate to students that they will get a more detailed introduction to some of these metrics in the next chapter.

4. Is 144 conversions (new orders) a good return on the $1,549 investment in the holiday campaign?

Even though $1,549 is a fairly small amount of money to spend on a marketing campaign, relatively speaking, the cost per conversion is $10.76 ($1549 spent / 144 purchases). Students should be pushed to think about whether this is good or bad as $10.76 by itself doesn‘t mean much until they have something to compare it to. So, here are some additional pieces of information to either share/reveal to them to get them thinking about return on marketing investment. The promotion offered customers 25% for holiday purchase. A box of bars purchased through the website (which is where the offer was valid and remember, they used a list of folks who had previously visited their website) is priced at $23.99 for a box of 12 bars. So, the discount on the box of bars is $6.

So, their effective price is actually $17.99 per box. Assume the production cost per bar plus the PlumpyNut donation per bar totals approximately $.95 per bar. So, that means it cost TSL about $11.40 per box. Now let‘s see what the financial return looks like for a box from their digital campaign: Regular Price per box $23.99 Discount of 25% $6.00 Holiday Discounted Price $17.99 Cost per bar to produce & donation Bars per box Cost per box

$0.95 12 $11.40

TSL Unit Contribution per box

$6.59

Cost of promotion per sale

$10.76

If a customer only purchases 1 box If all customers for holidays bought 2 boxes

($4.17) Loss of $4.17 per sale!)

Profit of $2.43 if everyone bought 2 boxes for the $2.43 holidays

Takeaway for students: Everything should be measured against goals. If goal was to make money outright on this promotion, then TSL probably lost money because it is doubtful all of the 144 conversions actually bought at least 2 boxes on average. This campaign would then be viewed as unsuccessful. However, the campaign could still be viewed as successful if TSL had a more long-term goal in mind. For example, if TSL knows that once a new customer makes a purchase, on average they will buy at least 1 more box at regular price, then this campaign would be judged as successful since this would make the campaign produce a positive financial outcome.

Math is:  Loss for TSL on discounted first purchase of a box = -$4.17  But, on next box purchased TSL makes $6.59 unit contribution  So, net gain for TSL is $2.42 (6.59-4.17) at a minimum if they buy at least one more box at regular price at some point.

5. What are the pros and cons of a program like this for regular customers? In other words, if customers who order regularly receive the holiday discount offer, is it good or bad for TSL? The risk of the discount program for regular customers is that regular customers buy at regular price and may have just been given a discount when they would have happily purchased at regular price, which simply cuts TSLs margin. In addition, regular customers when given a discount sometimes may then hold off on future purchases hoping for another sale because buying at regular price might now seem like less value than at a discount. On the other hand, regular customers could be excited about the discounted price and buy extra quantities over and above what they would otherwise.

6. Given the actual holiday remarketing offer (look at the image again), what do you think were the biggest strengths of the offer and what suggestions would you make to Chloe and her team for improving the offer if they do it again next holiday season?

Application Exercise Day Tweet Monday

Try our new flavour

Attachment (if any) Photo of packaging

Tuesday

Daquan‘s story

Photo of Daquan

Wednesday

Traveling? DFW Starbucks now has TSL Loyal customer X sends this comment Event/product demo What are you doing this weekend? Take TSL with you We donated X number of PlumpyNut bars this week/month

Photo of DFW airport

Marketing Purpose Product information Reminder of mission Product information

Photo of storefront Photo of outdoor activity

Testimonial about taste, quality Advertise event Encourage purchase

Thursday Friday Saturday

Sunday

Photo of clinic where doctors are treating malnourished kids

Reminder of mission

Chapter 14 Measuring Marketing Effectiveness through Metrics The Process of Measuring Marketing Effectiveness Set Tactical Objectives Set or Adjust Investment Level Select Appropriate Metrics and Execute Tactics Collect Data and Calculate Metrics

Apply Metrics and Interpret Results LO 14.1 Outline the process for measuring marketing effectiveness.

Measuring General Tactical Success Sales as an Overall Measure of Tactical Success Other Overall Measures of Tactical Success Customer Feedback as a Measure of Tactical Success LO 14.2 Describe the tools that are used to measure general tactical performance.

Product-Related Metrics: Measuring the Success of Investments in Customer Benefits LO 14.3 Explain and apply product-related metrics in marketing.

Place-Related Metrics: Researching the Value of Convenience and Availability Supply Chain Logistical Performance Distribution Intensity LO 14.4 Explain and apply place-related metrics in marketing.

Price-Related Metrics: Covering the Cost of Delivering Benefits to Customers Price and Demand: The Price Elasticity Metric Pricing and Cost: Break-Even Analysis LO 14.5 Explain and apply price-related metrics in marketing.

Promotion-Related Metrics: Evaluating the Success of Traditional Communications Media LO 14.6 Explain and apply traditional promotion-related communication metrics in marketing.

Participation-Related Metrics: Evaluating the Success of Digital Marketing LO 14.7 Explain and apply participation metrics for digital marketing.

Chapter Introduction This chapter looks at how marketers know whether the resources invested to support tactics have earned an attractive return. This is the idea behind the extensive use of metrics to provide quick and actionable feedback to managers at the tactical level; feedback helps them chart a course for their activities that ultimately leads to success for their long-term strategies.

LO 14.1 outlines the process for measuring marketing effectiveness and LO 14.2 describes the tools used to measure general tactical performance. Next, we explain and apply product-related metrics in marketing in LO 14.3, place-related metrics in LO 14.4,

price-related metrics in LO 14.5, traditional promotion-related communication metrics in LO 14.6, and lastly, participation metrics for digital marketing in LO 14.7.

Present the Industry Expert video to the class in which Mary-Em Waddington provides several examples of the link between strategy and tactics and the need to objectively measure the success of tactics. Discuss with the class how customer interactions with social media can be quantified using specific metrics to gauge the success of the campaign. Ask the class if they can think of other metrics marketers would want to know.

Industry Expert Video Mary-Em Waddington Please note: Video Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-choice Questions 1. Who are the key customers of BC Technology for Learning Society? a. small businesses b. schools c. large businesses d. other learning societies 2. What metric did Mary-Em say the use to measure success? a. sales b. total worth of the computers c. donated computers d. number of outstanding requests 3. What tools does BC Technology for Learning Society use to measure success? a. social media analytics b. Google analytics c. surveys d. number of satisfied customers 4. What did Mary-Em say is impacting her business? a. numerous requests for a single computer b. lack of donations c. use of students who re-furbish the computers d. lack of new computer requests Discussion Questions 1. How does BC Technology for Learning Society help communities?

2. What metrics does BC Technology for Learning Society measure?

3. What challenges does BC Technology for Learning Society face in measuring success?

The Process of Measuring Marketing Effectiveness LO 14.1 Outline the process for measuring marketing effectiveness.

Any time a marketing manager invests company resources, they should have in mind what to expect in return from those investments. Marketers use analytical techniques designed to test marketing tactics by comparing results against tactical objectives.

Display and review the basic process for assessing marketing effectiveness as shown in Figure 14.1 ―The Process for Measuring Marketing Effectiveness.‖ For each step in the process review the example provided in the text and ask the class of others to help confirm understanding of the process.

Set Tactical Objectives Tactics are the short-term, narrow operational decisions and actions that are used as parts of larger marketing strategies. Tactical objectives specify how marketing managers want the future to look. Importantly, tactics flow from strategies, so tactical objectives flow from strategic objectives. Consistency between strategic and tactical objectives is important for very practical reasons. All efforts should be aligned with common goals.

Set or Adjust Investment Level Note that we phrase this step in terms of setting investments rather than budgeting expenses. Our choice of words is to remind you that money spent on marketing should be viewed as investments from which returns are expected.

Select Appropriate Metrics and Execute Tactics All metrics should be easily implemented and clearly understood. However, the idea of being appropriate refers mostly to metrics being suitable for assessing the objectives at hand. In that respect, the term appropriate means that metrics should pertain to the objectives being evaluated as precisely as possible. Display Figure 14.3 ―Spotify metrics distinguish new fans from current listeners.‖ Ask the class to suggest more tactics and the metrics the firm would use to measure increases in brand awareness.

Collect Data and Calculate Metrics Data collection techniques will vary depending on the types of metrics being utilized.

Typically, they will be generated by internal sources. Once collected, the data can be used in the calculation of metrics.

Apply Metrics and Interpret Results Well-stated objectives should contain clear targets of performance; however, managers should be prepared to deal with situations where metrics come close to stated objectives but do not quite reach the stated thresholds.

Author Podcast 14.1

Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. To assess the success of a marketing plan, marketers should set metric-driven goals, collect consumer data and: a. set end dates for the plan b. outline all the steps to be taken c. assign a value to every action d. track sales 2. If getting a repeat sale is the tactical objective, marketers need to: a. develop a plan for price incentives following the first purchase b. develop a program to collect consumer data c. develop an innovative advertising program d. expand the retail outlets where the product is available 3. To encourage customer engagement, marketers need to: a. set up actions that drive the conversation b. have an active presence on social media c. advertise opportunities for face-to-face encounters d. give incentives for posting online reviews 4. It is very important in any marketing plan to: a. have a variety of advertising spots b. have a realistic budget c. assess what has worked in the past and adapt it to the present situation d. set up a way to collect data to measure the success of every action Discussion Questions 1. Why is it important to set a dollar value to every action in a marketing plan?

2. What kind of data should a marketer collect when doing a product launch?

3. What are some ways a marketer can collect data from consumers that can be used to measure performance against objectives of a marketing plan?

Discuss the ‗Ethical Dilemma‘ feature included in the chapter: Auto insurance keeps increasing in price, but is required if you want to drive a car and many customers find looking for and evaluating auto insurance an annoying and sometimes confusing task. For this reason, many customers simply renew their policies with their existing insurance carriers. Called ―retention‖ in the insurance world, estimates are that for auto insurance, about 75% or more of customers keep their existing insurance company. While remaining with the same insurance carrier is more convenient for customers, it is not necessarily financially beneficial. Government groups and critics have found evidence that some insurance companies, including many of the larger carriers, actually charge existing customers more than they would new customers for the same policy. In fact, some companies have admittedly used the specific metric for likelihood an existing customer would switch if faced with an increased price premium to influence rates upon renewal of a policy. In other words, if a current customer (based on past behaviour) seems likely to

switch to a different insurance company if quoted a significant price increase, then the new quote would be lower. If the customer has been loyal for many years and has not switched after repeated price increases, the new quote for renewal would be higher. Ask the students if this approach is ethical. How would the insurance company explain how such an approach might benefit existing or new customers?

14.1 Concept Check Question 1: Looking at how the marketing research and design (MRD) process works, give some examples of the kinds of resources a marketer might invest in. Why is it important to consider return on investment for those resources?

Answer 1: In terms of the research and design process, it seems as though the collection and analysis of data would have the best return on investment, as these are the areas in which the majority of usable information and data is coming from. That said, resources that help to compare results against tactical objectives are set in the beginning of the process for measuring marketing effectiveness. For example if a tactical objective is set by a marketer to determine which type of shoes are selling best in a specific market (e.g., women aged 18-25), resources that can help to answer this question will have the best ROI. This could be resources like focus groups, personal interviews, and tools of observation, like cookies in online shopping. This is important in terms of considering return on investment because this can help marketers evaluate whether these resources are going to help meet the criteria for success in terms of tactical objectives.

Question 2: What are the steps of the MRD process, and how might the tactics of your bank or credit union be influenced by this process?

Answer 2: The process for marketing research and design is: 1. Set tactical objectives 2. Set or adjust investment level 3. Select appropriate metrics 4. Execute tactics 5. Collect data and calculate metrics 6. Apply metrics to objectives 7. Interpret results

Measuring General Tactical Success LO 14.2 Describe the tools that are used to measure general tactical performance.

Marketing campaigns frequently have several tactical components operating at the same time. In addition to assessing the effectiveness of each component, marketing managers also want to know how the campaign is doing overall.

Sales as an Overall Measure of Tactical Success The first indication of success that many marketing managers consider is sales. Ask the class why this is so critical to the firm‘s understanding of overall success.

Other Overall Measures of Tactical Success Display and review Table 14.1, which lists a few key metrics used to measure overall tactical effectiveness. Market share is the percentage of the total sales in a product category going to a particular brand. Managers can also use relative market share in conjunction with market share to set tactical objectives relative to competitors. Managers can also use relative market share in conjunction with market share to set tactical objectives relative to competitors. Return on marketing investment (ROMI) is similar to ROI; however, ROMI focuses on returns attributable directly to marketing spending.

Managers use these four metrics together to assess overall marketing effectiveness, since the different metrics have different strengths and weaknesses.

Display Figure 14.4 ―Tesla‘s Metrics Tell an Electric Story‖ and discuss how the firm‘s marketing effort should be measured and evaluated.

Customer Feedback as a Measure of Tactical Success Customers often provide feedback directly to the company or via posting online reviews.

Successful companies track these comments and measure the relative positive and negative comments, paying special attention to customer complaints. Common metrics for assessing complaints include number of complaints, complaint rate, and the customer feedback ratio. The number of complaints is simply how many negative comments the company receives in a given time period. The complaint rate is the number of negative comments divided by the total number of comments, and the customer feedback ratio represents the percentage of positive reviews to total reviews. Review the examples given in the chapter for these metrics. Customer satisfaction is a customer‘s comparison of actual performance to expectations. If performance exceeds expectations, the customer is satisfied. A common method is to have customers rate their satisfaction on a 5-point scale. The actual customer satisfaction rating is calculated by taking the number of 4 and 5 ratings divided by the total number of survey responses. Review the examples given in the chapter for these metrics.

Discuss with students the ‗Applied Metrics‘ feature included in the chapter: The Brand Development Index (BDI) represents the marketing performance of one target market relative to others for the same product. Essentially, BDI compares relative sales for a product given the size of the different target markets. In the text, we calculated the BDI for Target A to be 2.67, which means Target A purchases the product at a rate of 2.66 times higher than sales of the brand as a whole (see Table below for reference). Review with students the BDI calculation for Target B and Target C. Ask students which target market (A, B, or C), they would suggest if they needed to choose to invest more marketing resources into one target market. Why would they choose this target market?

Total for All Target A Target B Target C Brands Sales $10,000 $20,000 $30,000 $60,000 # of People 1,000 5,000 10,000 16,000 Brand Sales / Population 10 4 3 3.75 BDI 2.67 1.07 0.80

Author Podcast 14.2 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. In the final analysis, the key indicator of the success of a marketing plan is: a. sales b. hits on the website c. likes and positive reviews online d. staying within the planned budget 2. Andrews Loos says that it is difficult to track success unless: a. sales increase b. profitability increases c. every step taken has a value d. the online community grows 3. Loos says that his firm developed: a. marketing plan cycle b. product launch cycle c. advertising plan cycle d. consumer conversion cycle 4. Awareness and trial are two of the steps in the cycle; a third step is: a. conversation b. visit to website c. Google search to see where product can be purchased d. interaction Discussion Questions

1. Which is a more important indicator of success—sales or profitability? Why? 2. If you were developing a marketing plan, how would you assign value to every step in the plan?

3. Is there a cycle that can be tracked of consumer behaviour around purchasing a new product? Explain your answer.

14.2 Concept Check Question 1: What performance metric do marketing managers generally turn to first?

Why? Answer 1: Sales are usually the performance metric which marketing managers look at first. It‘s easily quantifiable (dollars or units), and there is a certain inescapable reality in simple and pure sales figures. It‘s also easy to correlate rising sales with successful marketing and falling sales with unsuccessful marketing.

Question 2: What are the advantages and disadvantages of the four measures of tactical success in marketing research and design?

Answer 2: Metric

Advantages

Disadvantages

Market share

Shows marketing success in terms of how marketing tactics affect a brand‘s standing

Does not account for costs

Relative market share

Increase can show the degree to which market share gains come at expense of competitors

Does not account for costs

Return on investment

Considers sales and expenses, allowing marketers to consider whether investments in tactic are yielding sufficient returns

Largely ignorex competition

Return on marketing investment

Considers sales and expenses, allowing marketers to consider whether investments in

Largely ignores competition

tactic are yielding sufficient returns

Product-Related Metrics: Measuring the Success of Investments in Customer Benefits LO 14.3 Explain and apply product-related metrics in marketing.

Investments in the benefit-delivering capabilities of their brands should lead to greater acceptance, trial, and adoption of the brands by target markets, so managers use metrics to assess brand trial rates, sales growth, and product adoption and use by target markets.

Display Table 14.2 ―Metrics for Product-Related Tactical Success‖ and review each product-related metric using the examples in the textbook and then ask the class to discuss their meaning and limitations.

The brand trial rate gives marketing managers an indication of new-user acceptance.

Market penetration is the percentage of a target market that has tried the product at least once. Brand growth is important to marketing managers, who are always working to hit moving sales targets. The brand development index (BDI), gives an indication of how well sales of a brand to one target group compares to sales to other target groups.

Author Podcast 14.3 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Of the two ways mentioned by Andrew Loos to track participation when a new product is launched, one is: a. track inventory levels b. track brand trial rate c. track sales d. track reorders 2. The second way Loos mentions is: a. market penetration b. likes and online reviews c. sales d. inventory levels 3. The number of times a product is tried within a store is known as: a. redemption of a coupon b. brand trial rate c. in-store demo record d. sales 4. Another way of tracking new product success is: a. inventory levels b. number of coupons redeemed c. number of customers who respond to a questionnaire d. new shelves and reorders

Discussion Questions 1. What is the goal of market penetration and how can it be tracked?

2. Why is it important to measure all steps taken in the marketing plan?

3. What are some of the way to measure brand trial rate?

14.3 Concept Check Question 1: Explain brand trial rate and why it might be important to a marketing manager.

Answer 1: Brand trial rate is a metric for measuring product-related tactical success that looks at the percentage of a particular target group that purchases a brand for the first time. This could be useful to a marketing manager in the case of new brands, or the beginning of a product‘s life cycle, especially in a market with other competitors.

Question 2: What is BDI and how is it used by marketing managers? What are the limitations to this metric?

Answer 2: BDI is brand development index, which is a metric that compares a brand‘s performance in a target group to brand performance among all target groups. It helps to view where marketing efforts directed toward one target market are working as well as the overall marketing efforts for that brand. To make meaningful comparisons using BDI, companies should have three or more distinct target markets. With fewer than three, the BDI of one group is only the mathematical compliment of the other group.

Place-Related Metrics: Researching the Value of Convenience and Availability LO 14.4 Explain and apply place-related metrics in marketing.

The goal of supply chains is to provide consumers with the brands they want in the places they want them when they want to buy them. In this section, we consider supply chain performance from two perspectives: logistical performance and distribution intensity.

Supply Chain Logistical Performance If the supply chain‘s logistical functions are operating properly, trucks will be loaded with the right amounts of goods necessary to stock stores with neither too much nor too little of any product. Marketing managers use three metrics that identify potential supply chain problems. Display Table 14.3 ―Metrics for Assessing Logistical Performance of Distribution Channels‖ and discuss each metric with the class.

The first metric is the stock-turn rate, which is widely used by retailers and producers alike. The stock-turn rate measures how quickly individual SKUs move through a store.

The term stock keeping unit or SKU, is simply an identifying code that retailers give to each item they carry. Stock-out rate measures the extent or frequency of stockouts.

Managers also measure how long an SKU is out of stock, known as stock-out days.

Distribution Intensity Distribution intensity pertains to the number of retail outlets that carry a particular brand. Display and review Table 14.4 which lists commonly used metrics for measuring distribution intensity. Relevant outlet rate measures how available the brand is to customers who would potentially want it. To effectively use the metric, marketing managers must carefully decide what constitutes a relevant outlet, which generally means that members of the target market visit the outlet with some regularity. Category volume helps marketing managers assess how well the retailers carrying their brands give access to the customers they want to attract. The third distribution intensity metric is the amount of ―in-store real estate‖ a brand controls, which is measured in category shelf facings. A shelf facing is simply the number of individual retail packages facing consumers as they walk by.

Discuss with students the ‗Applied Metrics‘ feature included in section 14.4: Break-even analysis is an important tool for understanding the number of units (or total sales dollars) that the company needs to sell to cover fixed costs (and potential profit targets) given a specific price and variable cost per unit. In the example in the text, the company had fixed costs of $450,000, a selling price of $300, and a unit variable cost of $150, which meant the company had to sell 3,000 units to cover the fixed costs of $450,000. Suppose you are the marketing manager making the final decision for pricing for the next month.

Your fixed costs and variable costs will remain the same, but you are considering different prices for next month. You have three options you are considering. Option 1, keep price the same at $300 per unit. Option 2 is to decrease price 10% to increase sales.

Option 3 is to increase price 10% to try to increase profit. You know changing price will change sales, but how much do you think sales will increase if you drop price 10%? And how much do you think sales will decrease if you increase price 10%?

Review with students how to calculate the Break-even number of units needed to sell for the other two options. Ask students about the advantages and disadvantages of each price option given the break-even analysis. What price will you charge and why?

Option 1 Price stays same Option 2 Price -10% Option 3 Price +10% Monthly Fixed costs $450,000 $450,000 $450,000 Price per unit $300 $270 $330 Variable Cost per unit $150 $150 $150 Break-even units 3000 3750 2500

14.4 Concept Check Question 1: Explain the logistics function and how it goes beyond transporting products.

Answer 1: Logistics extend beyond the physical transportation of goods. It also ensures that the correct amount of inventory is loaded on a truck so that the right amount is stocked on the shelf, with neither too much nor too little inventory. This takes into account several things: the stock-turn rate (the number of times the inventory for a product is complete replenished in a given period), the stock-out rate (the percentage of total outlets that run out of inventory of a particular product during a given time), and stock-out days (the percentage of total days in a certain period that a specific outlet is out of the brand in question).

Question 2: Marketing managers need to think about distribution intensity for their brand.

Can you explain what this is and why it is important?

Answer 2: Distribution intensity relates to the number of retail outlets that carry a particular brand. Marketing managers must take this into consideration to ensure that sufficient retailer outlets are balanced with the brand‘s image—upscale, low-cost, highend, exclusive, etc. A marketing manager needs to optimize the level of distribution intensity such that it is consistent with their brand image.

Price-Related Metrics: Covering the Cost of Delivering Benefits to Customers LO 14.5 Explain and apply price-related metrics in marketing.

In this section, we focus on metrics used to assess whether or not prices are effective.

Marketing managers must not only balance the revenue and cost perspectives of price; they must also consider the consumer and competitive dimensions of price.

Price and Demand: The Price Elasticity Metric Perhaps the most important price metric is price elasticity. Price elasticity is simply the percentage change in quantity sold that occurs with a percentage change in price. Price elasticity measures how responsive people are to changes in price. Display Table 14.5 and review the example used in the textbook with class. Discuss why elasticity can vary.

Relatively elastic demand occurs in situations when elasticity is greater than one. The percent change in quantity is greater than the percent change in price, which suggests that additional quantity sold may be sufficient to offset a decrease in price. When the price elasticity equation yields a value of less than one, it suggests that large changes in price produce proportionately smaller changes in quantity. This is called relatively inelastic demand. When demand is relatively inelastic, people are relatively stable in their buying behaviour, so price is not as useful as a competitive tactic.

Pricing and Cost: Breakeven Analysis We introduced the third metric for assessing pricing effectiveness in Chapter 10. Breakeven analysis calculates sales levels in units or dollars required to cover both fixed and variable costs. Display Figure 14.6 Break-even Relationships and Table 14.6 Breakeven Formulas. Discuss the details in the example and repeat with several more to convey an understanding of how marketers use the model to decide pricing tactics.

14.5 Concept Check Question 1: Explain price elasticity and explain the main types of price elasticity.

Answer 1: Price elasticity is the percentage change in quantity sold that occurs with a percentage change in price. It measures how responsive people are to changes in price.

The metrics used to measure this are percent change in quantity and percent change in price. There are two ways that price elasticity can be viewed: relatively elastic demand (occurs in situations when elasticity is greater than one, suggesting the additional quantity sold may be sufficient to offset price decrease) and relatively inelastic demand (when price elasticity is less than one, suggesting large changes in price produce proportionately smaller changes in quantity).

Question 2: What is a break-even point and why is this metric important to marketing managers?

Answer 2: The break-even point is where the break-even revenue and the break-even quantity intersect when conducting a break-even analysis. This basically is the point at which total revenues begin to exceed total costs. This reference gives managers an idea of when profits will start rolling in. If the amount of sales is deemed unlikely to be achieved in a reasonable amount of time, managers might drop the plan to market the product.

Promotion-Related Metrics: Evaluating the Success of Traditional Communications Media

LO 14.6 Explain and apply traditional promotion-related communication metrics in marketing.

When measuring effectiveness in traditional media, advertising focuses on exposure of advertising rather than its creative content. Metrics for traditional media exposure centre on two basic components: reach and frequency. Reach refers to the percentage of people in a target audience exposed to an advertisement, and frequency refers to the average number of times those people saw the advertisement.

Together, reach and frequency are the two components of schedule intensity, which gives an indication of how ―heavy‖ a brand‘s media exposure is. The primary metrics for schedule intensity are gross impressions and gross rating points. Both metrics require data on reach and frequency and tend to be used most with traditional promotion media, primarily television advertising. Display Table 14.7 ―Traditional Media Metrics‖ and discuss the lists of basic promotion metrics.

An impression is simply one advertisement being seen once by one person during a given period of time. Display Figure 14.7 ―Gross Impressions and Average Frequency Calculations‖ and review the calculations. Figure 14.7 also shows the calculation for the media schedule‘s average frequency, which is needed to calculate the second metric of schedule intensity, gross ratings points (GRPs). GRPs give a summary measure, or weight, to the media schedule that incorporates both reach and frequency. GRPs are very often used to set media objectives for advertising. Media planners will prepare media schedules that are intended to achieve desired levels of GRPs. Display and discuss the GRP calculations shown in Figure 14.8 ―Gross Rating Points Calculations.‖ The two final promotion metrics in Table 14.7 offer marketing managers some indication of how much a traditional advertising media schedule costs to deliver to a certain-sized audience across different media. The more common of these two cost measures is called cost per thousand impressions, or CPM. CPM measures the cost of each 1,000 impressions.

Mini Case 14 Question 1. How familiar are you with Google Analytics?

Answer 1. Student answers will vary.

Question 2. Can you recall an instance when you viewed a website and then received targeted advertising, promotion, or email after you left the website? Can you now see how that is not only possible, but even likely?

Answer 2. Student answers will vary, but most students will most likely have noticed this

especially for digital advertising.

Question 3. What are the drawbacks of Google Analytics for customers? What are the benefits for customers?

Answer 3. The main drawback for customers is privacy. Some customers prefer not to be tracked and targeted in this manner. Another drawback is they may tire of seeing ads from the same company based on their website actions. However, a key benefit is customers see more information related to what they are interested in rather than random ads. Companies can also improve communications and their website for customers.

Question 4. What are the privacy implications of a service like Google Analytics and what in your view is an appropriate level of tracking for online behaviour?

Answer 4. Privacy legislation has improved to better protect consumers. However, with permission, websites can track every action that someone takes online. Some consumers are not personally comfortable with this. Students will have different ideas about how much tracking is too much based on their own comfort levels. Younger audiences are more accepting of tracking. However, some do turn off ads and erase the cookies from websites.

Question 5. Do you often sign into services/websites/online accounts with your Google account or Facebook account? If so, can you see how the information can be linked for marketing purposes?

Answer 5. Students may not initially think of the link between using or not using their accounts online. Using online accounts makes marketing more specific for each person, resulting in a better consumer experience.

14.6 Concept Check Question 1: Discuss some of the reasons that in marketing research and design, evaluating the effectiveness of traditional advertising creative can be quite difficult.

Answer 1: Evaluating the effectiveness of traditional advertising can be tough because market research methods are usually time-consuming and it can be challenging to adjust content ―on the fly‖, depending on the media (e.g., once a TV commercial is made, it is difficult/costly to change). Because of this, traditional creative media is often pretested in advance of final production which means that measurements of effectiveness focus on exposure of advertising, rather than the actual creative content.

Question 2: Differentiate the metrics of reach and frequency for evaluating the effectiveness of traditional media communication.

Answer 2: Reach is a metric that refers to the percentage of people in a target audience who are exposed to an advertisement. Frequency refers to the average number of times those people see the ad. In traditional media, reach is an audience estimate (e.g., television rating, magazine circulation), whereas frequency is determined by the advertisers and generally a budget.

Participation-Related Metrics: Evaluating the Success of Digital Marketing LO 14.7 Explain and apply participation metrics for digital marketing.

Measuring marketing effectiveness accurately demands timely data. Digital media metrics have the huge advantage of nearly real-time data. Google Analytics is a suite of tools powered by data from the Google search engine that provides real-time and summary data for an array of web-based metrics. Facebook offers a sophisticated analytics tool called Facebook Insights, which gives businesses and other Facebook users the ability to collect and analyze data about users who visit Facebook pages.

Display Table 14.8 ―Common Digital or Social Media Metrics‖ and review the items listed – Hits, Page views, Visitors, Clickthrough rate, Bounce rate, Conversion rate and Abandonment rate. Ask the class what sort of metrics they would expect for a website like Lululemon or some other online retailer.

Author Podcast 14.7 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. One of the metrics a marketer should pay attention to when tracking the success of digital marketing is: a. engagement b. online orders c. foot traffic in a retail location d. sales 2. Forms of engagement include: a. sales of the product b. response to an email campaign c. online reviews d. response to coupon offers 3. The second metric mentioned by Jasmine Bina is: a. repeat sales b. conversions c. online orders d. online reviews 4. It can be difficult to track how a customer goes through a website if: a. the customer leaves the website and comes back b. the customer only ―likes‖ a product c. the customer doesn‘t make a purchase d. the customer doesn‘t sign in Discussion Questions

1. Why do you think engagement and conversions are so important to track to gauge the success of a digital marketing campaign?

2. What are some of the forms that count as engagement? What are some others that Bina doesn‘t mention?

3. What could you do as a marketer to encourage customers to click through the digital marketing piece you have created?

14.7 Concept Check Question 1: How does the click-through rate differ from the conversion rate? Provide examples of each in a digital marketing context.

Answer 1: The click-through rate measures the percentage of how many people click on a specific link or ad while the conversion rate measures the percentage of visitors who make a purchase or complete a form on that link. Therefore, while the click-through rate measures the effectiveness of an ad in generating clicks, the conversion rate measures how successful the ad is at turning a visitor into a customer.

Question 2: A company has launched a new marketing campaign. There's an improvement in the click-through rate but not in the conversion rate. How would you interpret these results and what steps might you suggest for improving the conversion rate?

Answer 2: An improvement in the click-through rate but not in the conversion rate could mean that while the campaign is effective in attracting interest, it isn‘t convincing users to make a purchase. Steps to improve conversion rate could include optimizing the landing page, offering clearer calls-to-action, or improving the overall user experience.

Question 3: A website redesign has resulted in a higher bounce rate. What factors might have contributed to this, and how might you test your hypotheses?

Answer 3: Factors such as a confusing layout, slower page load times, unclear navigation, or poor mobile optimization could lead to higher bounce rates. Try making a variety of changes to the website and comparing the bounce rates of different versions.

Question 4: In the context of e-commerce, what does the abandonment rate measure?

How might a high abandonment rate impact an e-commerce business?

Answer 4: The abandonment rate measures the percentage of people who initiate the checkout process but abandon the website before making the purchase. A high abandonment rate reflects a high number of lost sales opportunities and may be a result of a complicated checkout process, unexpected costs added during checkout, or poor user experience. This negatively impacts e-commerce as conversion rates and revenues are lower. Businesses should attempt to learn what is causing a high abandonment rate and

use this information to improve the website and the checkout process.

Question 5: Why are marketing metrics in digital marketing still very unsettled? Do you think the metrics in use today will be the same in 10 years?

Answer 5: As digital marketing itself is still in its infancy, there is uncertainty is how to best utilize it, and therefore uncertainty in how to best measure it. There are some metrics that have emerged as useful and are likely to become more accurate in the next decade as digital marketing becomes more familiar and widely used.

Application Questions Question 1: Differentiate tactics from tactical objectives. How are they related?

Answer 1: Tactics are short-term, narrow operational decisions and actions used as parts of larger marketing strategies. Tactical objectives are objectives associated with tactics that specify how marketing managers want the future to look. Tactical objectives drive the choice of specific actions, whereas tactics are the actions.

Question 2: Why is sales not always the best metric for measuring marketing tactical success? Why will it continue to be a popular choice?

Answer 2: Sales isn‘t always the best metric for measuring tactical success because they do not exist in isolation; rather, they exist in the context of other factors that affect sales and ignoring those other factors in favour of focusing solely on sales is ill-advised. That said, sales continues to be a popular metric for measuring success because of the inescapable reality that exists in pure and simple sales figures.

Question 3: In marketing, sales figures do not exist in isolation; they exist in the context of many other factors that affect sales. Identify and explain the three factors that may affect sales that are discussed in this chapter.

Answer 3: Other factors that can affect sales could be competitors, general economic conditions (a recession or a period of growth), or even the weather (hurricanes, earthquakes, natural disasters).

Question 4: Explain the difference between ROI and ROMI. Why is ROMI always higher than ROI? Answer 4: ROI is the return on investment; it gives the percentage of net profit return on an investment and is usually expressed as total costs. ROMI is the return on marketing investment; it focuses specifically on marketing efforts and is determined as a percent contribution of marketing investments to a company‘s gross profit. ROMI is always higher than the ROI because ROI accounts for all expenses, whereas ROMI accounts for only marketing expenses.

Question 5: Explain price elasticity. How would the concept of price elasticity make a simple break-even analysis open to criticism that it is oversimplified?

Answer 5: Price elasticity is the percentage change in quantity sold that occurs with a percentage change in price. It measures how responsive people are to change in price. A break-even analysis can be, at its simplest, a determination of at which point a price cannot fall below to make profit. In terms of price elasticity—which can fluctuate based

on a number of factors, including changing costs, competition, and other factors like economic conditions, weather, etc.—a break-even analysis is not necessarily equipped to consider other variables. The break-even analysis does not take into account relative elastic or inelastic demand.

Question 6: If you had a click-through rate of 10% and 100,000 webpage visitors saw the ad, how many actually clicked on the ad?

Answer 6: Click-through Rate = # of clicks ad receives/people exposed to online ad, so: 10% = x/100,000 x = 10,000 Question 7: A retailer has a goal for a stock-turn rate of 5. If the product‘s average sales per month are $100,000 and the average inventory is $25,000, would the retailer be likely to keep this product on the shelves?

Answer 7: Yes. According to the average sales per month ($100,000) and average inventory ($25,000), the inventory is actually replaced 4 times per month. If the company‘s stock-turn rate is 5, inventory is replenished more than it needs to be.

Question 8: If a manufacturer spends $25,000 in a quarter on marketing expenses and has a gross profit during that quarter of $50,000, what is the return on marketing investment for the quarter?

Answer 8: ROMI = (Gross Profit – Marketing Expenses)/Marketing Expenses, so: 50,000 – 25,000 = 25,000/25,000 = 1 ROMI = 100% Question 9: If you have 10,000 unique visitors to your webpage, and 500 of them provide an email address to sign up for special offers, what is the conversion rate?

Answer 9: Conversion Rate = # of visitors who complete a task (i.e., provide email address) / # of total visitors, so: 500/10,000 = 0.05 = 5% Conversion Rate = 5% Question 10: If your manufacturing cost for a product is $200 and you can sell it for $400, what is your break-even quantity to cover your $20,000 of fixed expenses for a month?

Answer 10: The break-even quantity is calculated as follows: Break-even Quantity = Fixed Costs/(Price per unit – Variable Cost per unit) BQ = $20,000/($400-$200) = 100 units

Discussion Questions Question 1: Suppose you distributed a product through an exclusive distribution strategy.

Would metrics such as relevant outlet rates or category shelf facings be as important to your product as they would to a product utilizing intensive distribution? Why or why not?

Answer 1: For a product or a brand with an exclusive distribution strategy, relevant outlet rate would likely be just as important to a product or brand utilizing an intensive distribution strategy, as this is a measure of how available a brand is to its target market.

While this rate would likely be significantly greater for an intensively distributed product, it would still be relevant. Category shelf facings may be less important to an exclusive distribution product or brand, given the nature of exclusive products not being available in many stores, much less stores that have a myriad of brands on shelves.

Question 2: Marketing managers are often accused of being obsessed with market share.

Why would an obsession with market share be negative? Should market share be used or emphasized to the exclusion of other performance metrics?

Answer 2: Market share—and relative market share—metrics can help identify how successful a marketing tactic is and how it affects a brand‘s standing against competitors.

Focusing only on market share neglects some other aspects of measuring performance metrics and does not account for costs and investments. To get a more holistic picture of marketing effectiveness, marketers should measure market share, as well as ROI (and ROMI).

Question 3: Think about the traditional advertising metrics of reach, frequency, and gross rating points. Do these traditional media metrics have analogous metrics in the realm of digital media?

Answer 3: Some connections can be made between traditional and digital media metrics.

In terms of reach, which is the percentage of people in a target audience who are exposed to an ad, the digital media metric ―hits‖ is somewhat similar. Hits are the number of browser contacts with a particular sight. This means the site is available for exposure, although it may not necessarily translate into an actual page view, which could be loosely related to traditional frequency measures (i.e., the number of times people view an ad).

Question 4: Suppose you were the marketing manager for an online retail store, and you found that the bounce rate for your website was quite low compared to others in your industry. However, you found that the abandonment rate was unusually high. What do these symptoms suggest and what might you do to address them?

Answer 4: A low bounce rate would likely mean that customers are spending time on a site, navigating through pages, and finding products and brands that they wish to buy. A high abandonment rate, however, may indicate that prices may be high—both in terms of

product or shipping costs—or that something unrelated to price is cumbersome or that the purchasing pages are difficult to navigate. This could potentially be addressed by following up via email or notification with a consumer who has abandoned a cart with items in it offering a discount on shipping or total purchase, or perhaps offering a simple ―one-click‖ way to complete a purchase. Discussion in the class can occur by asking students for examples of abandonment in their own online retailing experiences—what made them abandon their cart, whether the retailer followed up, how likely they are to return on their own to complete a purchase, etc.

Question 5: Why are stock-outs considered ―the bane of producers, retailers, and customers alike?‖ Would stock-outs on products with high stock-turn rates be better or worse than stock-outs on products with low stock-turn rates?

Answer 5: Stock-outs can indicate poor supply chain efficiency, lost sales, and maybe even lost customers (in terms of a consumer becoming frustrated with a particular brand or retailer and abandoning it altogether). Stock-outs on high stock-turn rate items can be very disruptive—indicating poor inventory planning, shipping practices, or production scheduling. Stock-outs on a low stock-turn rate item would indicate lost sales, but relative to stock-turn rates, it may be less indicative of supply chain problems.

Question 6: A retail manager might argue that it is better to have one too few of an item in stock than to have one too many. Is the manager right?

Answer 6: Stocking items for availability can be a little tricky. On the one hand, running low on stock could mean that the product is in high demand; but it can also be a sign of poor logistics and supply-chain efficiency and cause lost sales. If a product is unavailable for purchase, consumers may wait a few days to try again—depending on the product— but in many cases, if the second time they attempt to purchase is unsuccessful they become increasingly unwilling to try other options both in terms of the product and the retailer. Taking this into consideration, it would seem that having one too few of an item could mean lost sales and lost consumers and brand/retailer loyalty, which may have a much more lasting impact than having one too many items on the shelf.

Running Case This Saves Lives (TSL) Video Please note: Video Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-Choice Questions 1. Ryan Devlin says that the TSL founders used as a case study: a. Kind Bar b. Clif Bar c. Bare Naked Granola d. Ben & Jerry‘s Ice Cream 2. After they did their research, the TSL founders: a. created a marketing plan b. created a business plan c. hired a sales team c. hired a marketing manager 3. Early members of the team included: a. a chef and a nutritionist b. a CEO c. a sales manager d. a brand specialist 4. When they discussed flavours, they relied in part on: a. the recommendations of the chef b. their personal preferences c. market research d. looking at competitors’ flavours Discussion Questions 1. At what point did the TSL founders explore partnerships with philanthropic organizations? What kinds of organizations would you have considered if you were a founder? Why? 2. What role do you think the formation of the brand message took in the creation of the business plan? At what point would they need to create a brand story?

3. What could/did they learn by looking at the competitors?

Running Case This Saves Lives (TSL) Questions Answers might include the following: 1. Think about the entire marketing mix for TSL. What MRD metrics discussed in this chapter apply to TSL for the various parts of the marketing mix?

If the TSL team is not already doing so, they need to apply the place-related metrics to determine their success with each of their retail outlets. If the stock turnover rate is high, they should have greater leverage with their retail partners with respect to holding the line on price.

The upcoming college tour provides a great opportunity to set some short-term tactical objectives and test the effectiveness of their various marketing efforts. Specifically, they can set objectives for in-person encounters versus social media touches to be able to compare how close each came to the targets they set.

2. Does the company’s mission to feed hungry children make profitability metrics more or less applicable to the company? Given the company’s mission, can you think of additional metrics that might apply to TSL that would not be relevant to other companies?

Since the cost of a PlumpyNut bar is part of the cost of each TSL bar, profitability metrics are especially important to the company. If the company is unable to make an acceptable profit on the sale of their bars, it will become more and more difficult to fulfil the mission.

3. As companies such as TSL rely more heavily on social and digital media to promote their products, how might the large quantities of data generated by these platforms actually inhibit the systematic use of MRD? It‘s possible that TSL could gather too much data—for example, an overabundance of data can blur trends.

Application Exercise Think about the college tour being considered by TSL. Develop an MRD plan to evaluate the success of the promotion. In doing so, consider the following: 1. Given your own experience observing on-campus events, what performance metrics should TSL use to judge whether their event is successful? Suppose the company planned to visit your campus. Use the metrics to set tactical objectives for the event. In doing so, think about the costs associated with putting on such an event. What metrics might be useful for calculating the return earned from the resources spent?

Given that the college tour combines face-to-face and social media, TSL can use a combination of foot traffic and on-site purchase data and website hits and online purchases to gauge the success of the events. ROMI can be used to calculate the return earned from the investment of travel, equipment rental, etc.

2. In the weeks following an on-campus event, what metrics can TSL use to see whether the larger objective of raising brand awareness has been accomplished? Consider all points of distribution the company uses.

TSL can use brand trial and market penetration rates, as well as social media results such as online purchases before and after the event and conversion rates.

3. In the weeks preceding an on-campus event, what metrics can the company use to assess whether their efforts to promote their appearance at the event has been successful? In other words, prior to the event itself, is there any way that the company can judge whether students know that TSL is coming to campus?

One way of judging whether students know of their upcoming visit is to do something like make a couple offering and track the number of coupons claimed.

Chapter 15 Finalizing a Marketing Plan Finalizing the Marketing Plan Tactics From Ps and Cs to Marketing Tactics Adjustments and Modification LO 15.1 Describe the process for translating the core and supporting marketing mix linkages into specific marketing plan tactics to include contingency planning.

Finalizing the Marketing Plan Implementation Responsibilities Budgets Timelines LO 15.2 Identify the primary implementation directives to include in the marketing plan.

Finalizing the Marketing Plan Evaluation and Control Mechanisms Point-in-Time Evaluation Continuous Monitoring Barriers to Successful Implementation and Control LO 15.3 Describe the key control measures used to assess marketing effectiveness in the short and long term, and identify potential barriers to implementation and control.

Chapter Introduction In this final chapter we revisit the strategy process to provide a step-by-step guide for implementing marketing strategy properly. The result is a workable, comprehensive marketing strategy that includes an action plan, implementation directives, and evaluation and control mechanisms.

In LO 15.1 we look at the process of translating the decided core and supporting marketing mix linkages (Ps – Cs) into specific marketing plan tactics. In LO 15.2, we focus on identifying the primary implementation directives to include in the marketing plan and finally, in LO 15.3, we describe the key control measures used to assess marketing effectiveness in the short and long term and we identify potential barriers to implementation and control.

Discuss the ‗Ethical Dilemma‘ feature included in the chapter: Lululemon Athletica, a leading Canadian activewear brand, has experienced tremendous growth and success since its founding in 1998. However, the company's journey has not been without controversy. One notable incident occurred in 2013 when the brand's founder, Chip Wilson, made insensitive remarks about women's bodies in relation to the company's products.

In an interview, Wilson suggested that some women's bodies were not suited for Lululemon's clothing and that the issue of pilling on the brand's popular yoga pants was due to the thighs of some women rubbing together. These comments were widely criticized, as they seemed to blame customers for product issues and perpetuated bodyshaming. Many customers and the public at large viewed the remarks as contrary to the brand's purported values of inclusivity, empowerment, and body positivity.

In response to the backlash, Chip Wilson issued a public apology. However, the damage to the brand's reputation had already been done. The incident raised questions about Lululemon's commitment to inclusivity and its treatment of customers who may not fit the brand's perceived ideal body type. Some customers chose to boycott the brand or turn to competitors with more inclusive marketing and product offerings.

Ask students if companies should be held accountable for the personal beliefs and opinions of their founders or executives. And, how can companies demonstrate a genuine commitment to their values when faced with controversies that challenge those values?

Present the video to the class and discuss the highlights.

In the industry expert video, Jagdeesh Mann, Founder of Sunflower Media, makes the point that effective marketing is always focuses on the target audience or objective.

Specifically, he reinforces two key points that we want to highlight, given that this chapter is the culmination of the course material, where we put everything together. First, marketers should consider who their target audiences are and how a customer interacts with a company, every communication—basically, anything that deals with the brand as a marketing opportunity, and the elements should be consciously integrated. Second, effective marketing requires setting objectives and measuring marketing outcomes against those objectives. Present the video to the class and discuss the examples highlighted that illustrate Jagdeesh‘s advice to marketers to bring an open mind to the creative process.

Industry Expert Video Jagdeesh Mann, Founder of Sunflower Media Please note: Video Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-choice Questions 1. What does Sunflower Media specialize in? a. multicultural media. b. digital marketing. c. advertising. d. customer engagement.

2. What requirement of creative did Jagdeesh Mann provide? a. it must be unique. b. it must be tailored to each digital platform. c. creative must form a single body. d. creative must differ for each campaign.

3. What area of creative is responsible for the most common mistake in multicultural media according to Jagdeesh Mann: a. the colours. b. the copy. c. the design. d. the images used.

4. What is a challenge marketers face when attempting to appeal to multiple multicultural audiences? a. the brand has different images to different audiences. b. the product is not used in the same way by different audiences. c. the message does not always translate well into other languages. d. the creative and message does not appeal to all audiences.

Discussion Questions 1. What does multicultural media mean?

2. Why is digital marketing strategy important?

3. What are some common mistakes that can occur when targeting multicultural audiences?

Finalizing the Marketing Plan Tactics LO 15.1 Describe the process for translating the core and supporting marketing mix linkages into specific marketing plan tactics to include contingency planning.

Marketing‘s job is to create a viable marketing plan, decide how to implement the plan, and then evaluate and control the plan, tools, and tactics, adjusting as needed to improve success. To do this effectively, the marketing manager needs to convert the marketing mix into specific tactical actions by describing what will happen, who will do it, when it will happen, and how much it will cost. Doing so lays out the template for implementation, but also identifies what should be evaluated and how, and highlights elements in the plan that might need additional contingency planning to keep the plan from failing.

The chapter opens with the mini case focusing on Planet Pantry.. Review the case with the class as a means to better understand the performance of Planet Pantry. This case helps set the stage for discussion about what constitutes good plans for any company.

Mini Case 15 Question 1. Have you ever used a service or product similar to Planet Pantry before? Can you share your experience?

Answer 1. Student answers will vary.

Question 2. Do you feel Planet Pantry's business model is sustainable?

Answer 2. Student answers may vary but should include a discussion of Planet Pantry‘s sustainable practices Planet Pantry. Planet Pantry focuses on reducing waste, Question 3. From the information shared in the case, can you anticipate what Planet Pantry's SWOT analysis would look like?

Answer 3. Student answers may vary but should include a discussion of Planet Pantry‘s sustainable practices. Planet Pantry focuses on reducing waste by minimizing packaging, encouraging bulk buying and asking customers to bring their own containers. They also concentrate on eco-friendly products which supporting sustainable practices.

Question 4. What do you think is realistic when it comes to refilling and recycling?

Answer 4. Student answers will vary but may include the need for a shift in customer acceptance of refillable and recyclable options. Education campaigns or partnerships with other organizations may assist in informing and engaging customers in the importance of sustainable practices. This may increase overall demand for refilling and recycling options.

Question 5. What other advice would you give Sam and Tyrell regarding their marketing options to gain more customers and change customers‘ behaviours?

Answer 5. Student answers will vary, but advice might include: targeted marketing campaigns, educating customers on the importance of purchasing eco-friendly products, partnering with various organizations to promote sustainable practices, engaging customers through surveys and building customer loyalty with loyalty programs.

From Ps and Cs to Marketing Tactics Recall that the end goal of the extended marketing mix is to put together a set of key linkages between the Ps and Cs that appeal to a specific target market and give the company a competitive advantage in the marketplace. For a specific brand and target market, certain linkages will be more appropriate and offer better opportunities than others.

Display Table 15.1 ―Mercedes-Benz and BMW Marketing Mix Comparison.‖ Different extended marketing mixes leads to different marketing tactics. For example, consider BMW and Mercedes. Table 15.1 provides a marketing mix comparison. Though the extended marketing mixes overlap significantly, the two brands use slight mix differences and different tactical executions to appeal to different target markets.

The tactical product decisions for Mercedes-Benz reinforce customer perceptions of prestige, success, and achievement with specific designs, interior materials, and colours.

Price, service, and limited availability reinforce the perception of prestige and exclusivity. BMW focuses on sportier designs, technology, and performance features to deliver customer benefits that include excitement, fun, and adventure. BMW has standardized its branded retail dealer stores to deliver a consistent image and level of service. Ask the class how else the two companies differ in tactical decisions and why they think these tactics were chosen.

Adjustments and Modification While comprehensive planning makes it more likely marketing will be successful, problems sometimes arise that affect the plan in unexpected ways. For contingency planning to be effective, the company has to answer four main questions: 1.

2.

3.

4.

What elements are most critical to the plan?

Which elements are the most difficult to implement?

What are the potential problems or roadblocks?

What would the company do if each of the potential problems or roadblocks occurs?

While considering or developing contingency plans, a firm is advised to stick to their core competence—something in which the company specializes or has expertise rather than attempt to do something that is better left to someone else.

Ask the class to identify some recent news items that have likely affected marketing for a firm and so suggest some contingencies that might deal with them.

Author Podcast 15.1 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Because of the smaller size of the company, TSL can focus more than a larger company on: a. inventory levels at each retail store that carries their brand b. what is happening at each outlet c. how sales are going d. which flavours are most popular 2. The higher price of TSL bars means they need to: a. have very high-quality standards b. have high-end packaging c. have a strong message at the point of sale d. keep adding new flavours 3. Andrew Loos says that one of his company‘s goals for every Starbucks store they visit is: a. to make sure the bars are well positioned for customers to see b. make sure the bars are attractively arranged c. make sure all flavours are being displayed d. create brand ambassadors at each store 4. The two linkages Loos discusses are: a. convenience and communication b. cost and connections c. convenience and cost d. connections and convenience Discussion Questions 1. What advantages does TSL have over Kind Bar because of their smaller size? What are some of the disadvantages?

2. How does Loos recommend that TSL remain transparent with their customers? What do they need to do?

3. What is the purpose of creating brand ambassadors in retail outlets? Can you recall an earlier example of a company that does an especially good job of creating brand ambassadors?

15.1 Concept Check

Question 1: How are marketing mix linkages translated into specific marketing tactics in a marketing plan?

Answer 1: Marketing managers convert marketing mix linkages into specific tactical actions by describing what will happen, who will do it, when it will happen, and how much it will cost. Identifying these key point helps to determine what should be evaluated and how it should be evaluated, and highlights elements in the plan that might need additional contingency planning.

Question 2: Why is it important to include contingency plans, and how is this done?

Answer 2: Contingency planning is important because even in the most comprehensive planning for successful marketing, problems can arise that affect the plan in unexpected ways. Contingency planning should answer four main questions: 1. What elements are most critical to the plan?

2. Which elements are the most difficult to implement?

3. What are the potential problems or roadblocks?

4. What would the company do if each of the potential problems or roadblocks occurs?

Finalizing the Marketing Plan Implementation

LO 15.2 Identify the primary implementation directives to include in the marketing plan.

After finalizing the action plan with specific tactics, including the contingency plans, the marketing manager must finalize implementation. The manager must assign responsibilities for each marketing task in the plan, assign specific budgets with costs for the tasks, and provide completion timelines for each task.

Responsibilities One of the most critical aspects of any implementation plan is to assign specific tasks and responsibilities to specific people to make sure all activities have someone to complete the activity. If someone in the organization wants information about a specific activity, everyone should know exactly who to approach. Generally, managers assign tasks to someone in the organization with relative expertise.

Budgets Budgeting is perhaps one of the more difficult decisions to make regarding marketing expenditures. There are two primary difficulties for budgeting: justification and specificity. Ask the class to suggest examples for various firms that illustrate these two categories of difficulty and their solutions.

Justification: Managers from other areas often view marketing expenditures as expenses to minimize. Some companies also require zero-based budgeting, building the budget based on marketing goals by justifying each dollar spent for the new period. This approach forces a new consideration of tools and tactics (and their costs) each time a manager creates a budget, so managers can‘t simply rely on previous budget rules or approaches.

Specificity: Budgets are spending plans created before the spending occurs, making it difficult to predict actual spending required. Costs can change. The spending amount might change because original estimates were not accurate.

Timelines Display Figure 15.4 ―Sample Timeline for Marketing Implementation.‖ Review the grid and walk students through what will be done and when. Ask if everything looks as it should or if they would make changes.

Timelines provide a calendar for both marketing activities and outcomes and goals,

specifying when outcomes should or will occur. While most activities and goals will have a specific deadline or time frame, others will require more flexibility. As with budgets, many companies have both short-term and long-term timelines for marketing activities and adjust the longer-term timeline as the short-term timeline unfolds.

Author Podcast 15.2 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Company goals drive: a. implementation strategy b. budget and timeline c. sales objectives d. sales tactics 2. Implementation strategy drives: a. sales tactics b. sales objectives c. budget and timeline d. brand message 3. The first stage of TSL‘s partnership with Starbucks had: a. a well-defined timeline and sales objective b. an aggressive sales objective c. a narrow focus d. clear benchmarks 4. Once a marketer has the timeline and sales objective, the next step is to: a. set the plan in motion b. evaluate what is needed to achieve the objective c. decide if outside resources are needed to achieve the objective d. create a contingency plan in case the strategy doesn‘t work Discussion Questions 1. What are the steps in carrying out company goals?

2. How might you determine the budget for the cost of implementing the plan?

3. How might you evaluate how to achieve a goal?

15.2 Concept Check Question 1: What are the primary implementation directives to include in the marketing plan?

Answer 1: Primary implementation directions to include in the marketing plan are responsibilities (assigning personnel specific tasks and responsibilities to ensure all actions have someone available to complete the action), budgets, and timelines (when

marketing activities, outcomes, and goals will occur).

Question 2: Why is it so important to assign responsibilities, set budgets, and set specific timelines in the marketing plan?

Answer 2: Without assigning responsibilities, there is a risk that despite careful planning of specific activities, no one will be designated or available to complete the activity. In terms of budgets, it‘s important to recall that all marketing resources should be viewed as investments, regardless of whether or not the resource is financial. The very items that make budgets difficult in some ways are also what make them valuable: justification (meaning that for whatever dollar amount is given, a ROI justifying that cost is given) and specificity (it can be difficult to predict future spending and because of this, flexibility should be worked into budgets). Last, timelines are similar to responsibilities—careful planning without deadlines may mean that an activity/objective/goal is never met or completed.

Finalizing the Marketing Plan Evaluation and Control Mechanisms LO 15.3 Describe the key control measures used to assess marketing effectiveness in the short and long term and identify potential barriers to implementation and control.

After finalizing a budget and timeline, the manager must decide how to monitor and control implementation. In other words, you need to decide how to evaluate the plan during implementation. Managers make three major decisions regarding monitoring and control. (1) Will the monitoring and control approach be more proactive or reactive? (2) What type of control mechanisms will be used? (3) How will you know if the plan is working as it should? Managers must also consider the barriers to implementation and control when making these decisions.

There are two basic approaches to monitoring and control when implementing a marketing plan. A manager can opt to use a reaction control system or a steering control system. The reaction control system is probably still more common and involves preset evaluation points and standards. For example, a company might set an annual plan and have quarterly goals for sales or market share. A steering control system is an ongoing monitoring and control approach that assumes managers should continuously monitor what is happening to proactively make changes as the plan unfolds rather than at preset times such as the end of a quarter or year.

The second control decision is to decide which controls will be used, and whether these controls will be formal or informal controls. Formal controls are rules, policies, or guidelines defined by management tied to marketing activity inputs, processes required to implement the activities, or desired outputs of the activities. Informal controls are unwritten influences on employee behaviour related to implementation not specified by management. Informal controls can be self-control, social control, or cultural control.

A final decision a manager makes regarding implementation control is to decide how they will know if things are working as intended when implementing the plan.

Companies often use comparisons to judge implementation success. Benchmarking is the process of comparing your company to others to assess performance. Comparing companies often results in the identification of things that consistently work and things that consistently fail. Best practices are shared processes, knowledge, and expertise that have proven to be successful.

Point-in-Time Evaluations One option for measuring marketing effectiveness is to use point-in-time evaluation.

Point-in-time evaluations are assessments of how a marketing tool or tactic is performing at a given moment. There are two commonly used point-in-time evaluation methods: marketing research and marketing audits. Marketing research is used to uncover

issues or solve problems. For example, a marketer might use marketing research to assess whether customers have seen a specific ad or to determine how customers perceive the brand relative to a competitor‘s brand.

While marketing research offer marketers an opportunity to assess effectiveness at a given point in time, a marketing audit is a comprehensive assessment of the marketing mix at a given time. Display Table 15.2 ―Simple Marketing Audit‖ and review with the class. Examine the comparisons between the marketing objectives and the actual marketing outcomes.

Continuous Monitoring While point-in-time evaluations provide a one-time assessment of marketing performance, most companies also collect ongoing information to assess marketing activities. This allows the marketer to have a ―snapshot‖ of where marketing stands at a given point. Chapter 14 described many of the key metrics marketers track in real time to provide continuous monitoring. Continuous monitoring allows managers to see marketing outcomes sooner than point-in-time evaluations. Marketing dashboards provide a quick glance at performance measures to determine if tasks are on target.

Elements in the dashboard should match the level and measures appropriate for the tasks and management need.

Display Figure 15.5 ―Marketing Dashboards Offer Managers a Real-Time Snapshot of Marketing Performance‖ and discuss what these items communicate to managers.

Another commonly used format for continuous monitoring of marketing effectiveness are balanced scorecards. The concept of a balanced scorecard was created by Robert Kaplan and David Norton in the early 1990s as a way to link strategy, activities, and performance in a graphical way that allows a manager to quickly assess current performance on financial and nonfinancial measures. Specifically, their concept of the balanced scorecard includes four categories of performance indicators: financial, customer, internal business processes, and learning and growth. These four categories of indicators provide not only an assessment of where the company stands at the current moment, but also information about where the company is headed.

Display Figure 15.7 ―Balanced Scorecards Show General Marketing Strategy Overview‖ and Figure 15.8 ―Balanced Scorecards Show Specific Performance Targets Compared to Actual Performance.‖ Discuss the examples.

Barriers to Successful Implementation and Control Careful planning improves the likelihood of success for marketing plan implementation.

However, there are several potential barriers you might face when implementing a marketing plan. Some of the more common barriers include: 1. Incentives. It is often important to persuade employees to cooperate to implement the plan. In effect, companies often use internal marketing to secure participation. Internal marketing is marketing that targets employees within the firm. Typically, the company either offers incentives (financial or other) or threatens potential penalties if the employee does not cooperate appropriately. Ask the class which they think works better and why?

2. Functional divisions. Sometimes functional divisions get in the way of cooperation when implementing a plan. For example, marketing decides it would be better to add another feature to the product, but production does not want to change the production process. Ask the class how the firms should deal with this barrier.

3. Internal politics. Perhaps one manager preferred a different plan or has an interest in the current plan. In such cases, power struggles often occur. Ask the class how they think it might be possible to overcome internal politics as a barrier.

4. Inward-focused marketing department. There are a number of examples of prominent companies failing to focus on the customer and instead resisting new ideas that would better serve customers. Ask the class to suggest examples.

5. Lack of marketing philosophy. Without top-level management support, marketing will have a reduced role and be less effective for the entire company. Ask the class how the marketing philosophy can be installed throughout the organization.

6. Bureaucracy. The larger the organization, the more likely the company is to have functional departments and divisions between business units. In such cases, the bureaucracy can sometimes impede marketing implementation. Ask the class for ideas to address this barrier.

Discuss the ‗Applied Metrics‘ feature included in the chapter: You have started a small company selling hand-made jewelry online. To reach different target markets, you have created two different websites. The first website targets shoppers more interested in how the jewelry is made, the tradition of hand-made merchandise, and the story around the different jewelry pieces. The second website targets shoppers interested in fashion, the look of the jewelry, and the uniqueness that comes with buying hand-made pieces. You are considering how to invest more time and money in one of the websites and want to make the best decision possible, so you are considering the following metrics: Hits = Number of contacts with the website Page Views = Number of pages viewed/visited on the website Number of visitors = How many unique visitors (or at least devices) who visit a website Bounce Rate (%) = (Number of visitors who only visit one page ÷ Total number of visitors) x 100 for %

Abandonment Rate (%) = (Number of abandoned web interactions ÷ Total number of visitors) x 100 for % Conversion Rate (%) = (Number of visitors who purchase ÷ Total number of visitors) x 100 for % You have been tracking the metrics for both websites and have the following information from analytics from the last month: Website 1 Website 2 Hits 750 2500 Page views 3000 2500 Unique visitors 500 1500 Visitors who left site seeing only first page 50 500 Visitors who placed something in cart 200 500 Visitors who bought something 150 250 Bounce Rate (x 100 for %) Abandonment Rate (x100 for %) Conversion Rate (x 100 for %)

10.00% 10.00% 30.00%

33.33% 16.67% 16.67%

Review the calculation for the metrics for each website. Ask students what they learn from the metrics about each website and which website do you think deserves more marketing investment going forward and why.

Author Podcast 15.3A and 15.3B Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Among the marketing controls Andrew Loos mentions, those he calls proactive include: a. real-time monitoring of inventory levels b. regular check-in sessions with the entire team c. systems, tools, and team in place to foster growth d. strong partnerships with channel members 2. Loos categorizes as a reactive control: a. hiring behind the curve b. monitoring of sales levels at all outlets c. quarterly evaluations of implementation strategy and tactics d. quarterly evaluations of channel partners 3. Loos reiterates the importance of: a. having aggressive sales objectives b. having a metric for every goal c. hiring at the right time

d. constantly updating the brand message 4. Two recommendations that fall into the category of risk management are having: a. three- and five-year marketing plans b. having a contingency plan for unexpected circumstances and a retention plan c. new product launch plans well in advance of implementation d. pricing strategy plans to employ in the event of a new competitor Discussion Questions 1. Explain the notion of hiring in the right order.

2. Where can a new business owner get information about how to set objectives and set up controls?

3. What are the steps that could be considered risk management?

Company Field Trip Video Zipcar Please note: Video Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. The mission of Zipcar is to: a. enable simple and responsible urban living b. encourage sustainable living by allowing urban dwellers to sell their cars c. reduce greenhouse gases d. replace personally owned cars 2. Kate Pope-Smith says that Zipcar‘s brand of marketing is: a. innovative b. focused on benefits c. personalized d. based only on social media channels 3. One of the four core values of the company is that they are: a. fast growing b. focused on millennials c. agile d. community based 4. A recent promotion Zipcar ran was: a. Drive the Vote b. Adopt a Pet c. Save a Child d. Walk to Work Discussion Questions 1. What is the mission of Zipcar? How has it changed over time?

2. Explain Pope-Smith means by ―personalized marketing.‖

3. Lindsay Wester says that the company is socially responsible. Based on what you learned in this video, in what ways has the company demonstrated social responsibility in the local community?

15.3 Concept Check Question 1: What are the key control measures used to assess marketing effectiveness in the short and long term and why are these important?

Answer 1: Key control measures used to assess marketing effectiveness include determination of whether to use a reaction control system or a steering control system; and determination of formal (rules, policies, guidelines defined by management and tied to marketing activity inputs, processes, or desired outputs) or informal (unwritten influences on employee behaviour related to implementation: self-control, social control, cultural control). Control systems can be implemented in point-in-time evaluations or through continuous monitoring. Point-in-time systems provide a one-time assessment of marketing performance, whereas continuous monitoring collects ongoing information about marketing.

Question 2: What are some of the most common barriers to the effectiveness of implementation and control, and how can managers overcome these barriers?

Answer 2: Common barriers to implementation and control effectiveness include: Barrier Method of Overcoming Those assigned specific tasks do not want Incentives or penalties to do that task Conflicts between functional divisions Cross-functional teams Internal politics Designating one leader to make final determination; democratic process where members vote to approve or reject plans Inward-focused marketing department Refocusing to customer-facing connections in marketing mix to reaffirm need for external marketing Lack of marketing philosophy Engage top-level management support Bureaucracy Thoroughly assign jobs and tasks to specific individuals

Application Questions Question 1: Just like companies, colleges and universities have different extended marketing mixes. Compare your college or university to another that you considered and describe at least two key tactical differences.

Answer: Answers will vary among students. Responses may include core and supporting linkages such as ―Product Customer Benefit‖, ―Place Convenience‖, ―Price Customer Benefit‖, or ―Participation Connections‖. Dependent on linkages chosen, tactical differences between schools will vary. An example includes: Price Customer Benefit: University A was $5,000 per semester for in-state tuition and housing; University B was $7,500 for out-of-state tuition, housing, meals, and other fees Place Convenience: University A is located in a small town on the outskirts of a medium-sized U.S. city, 25 minutes from city, and 1 hr. in either direction to two major U.S. cities, minimal public transportation options available, would need a car; University B: in a large city, access to public transportation, farther from family, would make transportation home difficult and/or expensive.

Question 2: What are some common issues a manager has to consider when determining a timeline for implementation?

Answer 2: Managers should first consider what activities or goals have a firm deadline or time frame, and which allow for a more flexible schedule. Managers should also consider whether there are certain items that must occur before others, and stagger accordingly.

Other considerations would certainly depend on the product: for something like a new gaming system, managers would certainly want to maximize interest and sales by making the system available in time for winter holidays, as opposed to missing that timeframe.

Question 3: Pick any industry you want and do a search for best practices in that industry.

What did you find? Are the best practices you identified applicable to other industries? If so, name at least one and explain why you think the best practices would transfer.

Answer 3: Answers will vary. A sample response is as follows: Industry: Automotive Best Practices include: making the website mobile-responsive; forgo broad targeted ad campaigns in lieu of micro-targeting to send customized offers for specific geographic regions; including call extensions (phone numbers) in ads, and utilizing newer ad formats that are larger ads, link to manufacturer website and relevant dealerships; and marketing services, not just cars.

Most industries could benefit from making their websites mobile responsive, since so many customers use their mobile devices to search for options and make retail purchases.

Question 4: Go online and find an example of a marketing dashboard. What is being measured? What can you tell about how the company measures performance from the

dashboard?

Answer 4: Answers will vary based on student research and selection. Most dashboards will measure at least several of the following: revenue, opportunities & prospects, conversion rates, lead pipeline/lead-to-cash flow, geographic data, demographic trends, source tracking, content engagement, attribution modelling.

Question 5: Go online and find an example of a balanced scorecard. What key performance indicators are included in the scorecard?

Answer 5: Answers will vary based on student research and response. KPIs included will depend on industry, but some examples may include: monthly website traffic, number of qualified leads, conversion rate, keywords in top 10 search engine results, blog article published per month, etc.

Discussion Questions Question 1: What is the difference between marketing strategy and tactics, and which is more important from the manager‘s perspective?

Answer 1: Whereas marketing strategy is a more general, long-term plan for marketing activities, marketing tactics are the smaller activities that can work together within the framework of the strategy to achieve a larger marketing goal. From a manager‘s perspective, both are equally important: strategy most likely drives tactics, and without actionable tactics, strategy cannot be achieved.

Question 2: Would a reaction control system or a steering control system generally be better? Explain.

Answer 2: A steering control system is typically more responsive to the market and forces managers to think about how each day‘s activity translates into specific outcomes that are important to the success of the company. Reaction control may be more common, but may not be as responsive, as evaluation points and standards are pre-set.

Question 3: What is the main difference between a formal control and an informal control? Which do you think is more effective and why?

Answer 3: The main difference between formal and informal controls is that formal controls are more related to marketing activity inputs, implementation processes, and outputs, and informal controls are more closely linked to employee behaviour related to implementation. Formal controls may be more effective as they are related more to tangible action items and processes, whereas informal controls are less objective and measurable. Responses can vary based on student perspective; discussion can be led

regarding situations or industries in which informal vs. formal controls may be more effective or important, and vice versa.

Question 4: Students often ―benchmark‖ classes, instructors, and programs. Is this benchmarking useful? Comment from the student‘s perspective, the instructor‘s perspective, and the program‘s perspective.

Answer 4: Benchmarking from a student‘s perspective may include informal conversations between students comparing the relative difficulty or ease of a class/instructor/program, and other more specific items, such as attendance policies, takehome work, grading, participation expectation, instructor office hours, or instructor personality. It could be useful to some students and in some cases, however given the subjective nature of some items (specifically difficulty/ease and instructor personality), different students will have different perspectives. An instructor may utilize benchmarking as a method of self-evaluation: the final grades of one class vs. another section of the same class; final grades from one semester vs. another semester; or even against another section of a class taught by a different instructor. This could be helpful to allow for adjustment in planning, e.g., if one semester‘s classes perform, on average, more poorly than another semester, the instructor could evaluate what variable were different and adjust if necessary. From a program‘s perspective of benchmarking, it may be valuable for a program at one institution to evaluate itself against similar programs at other institutions to help adjust its marketing mix and strategy. Different programs within the same institution may be compared to one another as well.

Question 5: Can internal marketing be as effective as external marketing? Explain.

Answer 5: Internal marketing targets a different group altogether—employees, personnel—however, effective internal marketing can inspire employees and even incentivize them towards truly believing in a company/brand/product and serving as a great outward-facing source of positive and effective marketing. It can be said that happy employees tend to produce positive results for a brand—we hear stories in the news all the time about great places to work, and so often, those same great places to work are also successful, profit-wise, in their industries. Discussion can be led by asking students for examples of times when they have worked somewhere that successfully initiated internal marketing or a place that did not market internally or did so poorly. What was external marketing like in these places?

Running Case This Saves Lives (TSL) Video Please note: Video Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-Choice Questions 1. Ryan Devlin says that the first marketing implementation plan had a timeline of: a. 1 year b. 2 years c. 3 years d. 5 years 2. The initial sales goal for Starbucks stores was: a. 3 bars per store per day in 500 stores b. 10 bars per store per day in 500 stores c. 3 bars per store per day in 100 stores d. 3 bars per store per day in 300 stores 3. Devlin says that as the company grew, the marketing plan didn‘t really change, it: a. grew more targeted b. grew more diverse c. stayed the same d. scaled 4. To help them achieve their goals, the TSL team: a. hired more employees in key positions b. worked with partners c. expanded their retail outlets d. created a R&D team to come up with new flavours Discussion Questions 1. How did the TSL marketing team scale up their original marketing plan?

2. What were some of the performance measures they used to gauge success?

3. Why is measuring performance so important to success?

Running Case This Saves Lives (TSL) Questions Answers might include the following: 1. Which of the three options is the highest risk? Why? Option 1 is the highest risk because it poses difficulties for the team if the grocery chain places either a smaller, ―test‖ order or choose to order the much larger quantity.

2. Which of the three options is the least risky? Why? Option 2, ordering some extra vanilla, is the least risky since this option would allow the team to come up with a strategy for fulfilling all their orders, although they would have to do some shuffling.

3. Which of the three options would present the greatest challenge from a marketing perspective if something unexpected happens?

If the unexpected was that enough beans weren‘t available—because of drought or political unrest—all three options would present problems, but perhaps the greatest challenge would come if TSL ordered enough vanilla to fulfil the huge new order because they might have paid for the beans and would then have to pursue other channels to get the product they need.

4. Can you think of other viable options for each decision if the unexpected happens? Be specific.

TSL could order pure vanilla from another source than Madagascar.

5. What would you suggest they do in this situation? Justify your decision.

Perhaps ordering from more than one source is the best option for the company, since it would ensure that they have at least some of the product they need.

Application Exercise Recall in Chapter 3 we discussed how the environment affects marketing decisions. One of the environmental issues TSL faced was the potential for significant increases in price and shortages in vanilla from Madagascar, the primary source of vanilla in the world.

Increasing demand from other companies combined with drought or poor growing conditions could mean shortages of one of TSL’s most important ingredients. How could TSL plan for such a contingency? Answer the following questions and develop a minicontingency plan for TSL just in case they face a situation of vanilla bean shortages from Madagascar.

1. Product problem: What would be one specific product issue TSL would face if they could not get their needed supply of vanilla beans? Plan: Suggest one step TSL could use

to address this product problem. (Hint: If they cannot get real vanilla beans in the quantities needed to meet demand, how could they or would they change their product(s) to address this problem?)

If the team wants to maintain a vanilla flavour, they may have no other option than using pure vanilla extract or vanilla beans from a secondary source like Mexico.

2. Place problem: What would be one specific place issue TSL would face if they could not get their needed supply of vanilla beans? Plan: Suggest one step TSL could use to address this place problem. (Hint: If they cannot get real vanilla beans in the quantities needed to meet demand, how could they or would they change their place options to address this problem? Could they limit which customers get vanilla-based bars? How?) If they have a preferred customer program, the team could limit sales of the most popular flavoured bar to those customers.

3. Price problem: What would be one specific price issue TSL would face if they could not get their needed supply of vanilla beans? Plan: Suggest one step TSL could use to address this price problem. (Hint: If they cannot get real vanilla beans in the quantities needed to meet demand, how could they or would they change their price(s) to address this problem?)

They could lower the price of the vanilla/almond bars to reflect that they are using a lessthan-premium ingredient. They would need to promote this change.

4. Promotion problem: What would be one specific promotion issue TSL would face if they could not get their needed supply of vanilla beans? Plan: Suggest one step TSL could use to address this promotion problem. (Hint: If they cannot get real vanilla beans in the quantities needed to meet demand, how could they or would they change their promotion to address this problem? Would they promote differently by focusing on other flavours, or should they explain the shortage in some way to customers through promotion? How?) The team should inform customers of the change in product (should it become necessary) through social media. If they decide to lower the price, they should also promote that price change.

5. Participation problem: What would be one specific participation issue TSL would face if they could not get their needed supply of vanilla beans? Plan: Suggest one step TSL could use to address this participation problem. (Hint: If they cannot get real vanilla beans in the quantities needed to meet demand, how could they or would they change their participation to address this problem? Given their focus on malnutrition, could they encourage customers to participate in some way that might help areas hit by the drought, or could they use the shortage to highlight their malnutrition cause in some other way?

How?) The team could do a ―focus on Madagascar‖ promotion, informing customers about the country, *largest producer of vanilla beans in the world *have been suffering drought conditions since 20XX *90% of the population farms—other crops include *political situation is xxx

*impact of drought is…

If malnutrition is an issue in Madagascar, TSL could investigate whether there are organizations that provide medical services to address it.

Address how each of the problem’s explained above should be addressed in TSL’s contingency plans and why. Rank order the importance of each item in the contingency plan.

Rank order: product, promotion, price, place, participation

Appendix Developing an Integrated Marketing Mix Integrating the Core Marketing Mix Linkages LO A.1 Identify and describe the core linkages between the main producer and customer elements of the marketing mix.

Supporting Marketing Mix Linkages LO A.2 Conduct a marketing mix analysis that identifies potential supporting linkages between producer and customer elements of the marketing mix.

Arriving at a Final Marketing Mix Solution LO A.3 Describe the steps to arriving at a final marketing mix solution.

Chapter Introduction This chapter looks at how the marketing mix is integrated and how decisions have to be complementary to be successful. There are two important criteria for a successful marketing mix. First, the core marketing elements should be consistent and work together. Second, the marketer has to understand how one decision might affect customer perceptions across the mix.

In LO A.1, we identify and describe the core linkages between the main producer and customer elements of the marketing mix. In LO A.2 we conduct analysis that identifies potential supporting linkages and finally, in LO A.3, we describe the steps to arriving at a final marketing mix solution.

Present and discuss the Industry Expert video to the class in which Gary Hirshberg illustrates a successful integrated marketing mix at Stonyfield Farms. Ask the class if they see any weaknesses in the marketing mix.

Industry Expert Video Gary Hirshberg Please note: Video Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the videos with their students. Correct answers to multiple choice questions are bolded.

Multiple-choice Questions 1. Before social media became widespread, Stonyfield Farms: a. used its packaging to tell its story b. engaged customers by extensive use of mail and email c. relied heavily on television advertising to tell its story d. relied heavily on word of mouth 2. The Stonyfield Farms message to consumers was that when you buy something: a. you are voting for that product b. you are expressing your tastes c. you are voting for the kind of world you want to live in d. you are saying that you like the company who produces it 3. Stonyfield learned that what retailers were interested in was: a. ability to keep their products in stock b. willingness of the company to give support to the retailer c. willingness to offer exclusive deals to the retailer d. the kind of promotions they were willing to offer 4. Hirshberg says that the ―holy grail‖ is: a. customer loyalty to the brand b. gaining market share every year c. gaining national recognition d. being recognized as the best yogurt available Industry Expert Discussion Questions 1. In what ways did Stonyfield Farms‘ beginnings as a non-profit contribute to their effort to encourage participation and connection with their customers?

2. What advice does Hirshberg give to someone launching a new product?

3. How has social media marketing enhanced the early marketing efforts of Stonyfield Farms?

Integrating the Core Marketing Mix Linkages LO A.1 Identify and describe the core linkages between the main producer and customer elements of the marketing mix.

As a refresher from Chapter 7, the extended marketing mix, the 5 Ps/Cs framework, represents the core linkages between the decisions the marketer makes and the intended effect on customer perceptions of value. Display Figure A.2 which depicts the five core mix linkages and review the textbook analysis of the GoPro example to see what they did well and perhaps not so well.

Product–Customer Benefits Product is perhaps the most important core marketing mix element for GoPro, in part because the founders created the company in response to desired customer benefit that existing products didn‘t meet.

Place–Convenience GoPro uses place decisions to deliver convenience. GoPro is convenient to purchase – Best Buy, Walmart, Cabela‘s, etc.

Price–Cost GoPro prices its cameras based on what it expects customers would be willing to pay, effectively using a value-based pricing approach. Using this approach requires appropriate estimation of customers‘ perceived value, and GoPro has had some success judging customer‘s perceptions of costs and pricing their cameras at levels that offer customers reasonable value.

Promotion–Communication GoPro uses a variety of promotion tools to communicate with its target customers.

Participation–Connection GoPro manages participation in several ways, and you could argue that GoPro has an inherent advantage over many technology products in this marketing mix element. GoPro cameras and camcorders capture customer experiences, and GoPro encourages customer participation through uploading videos to sites like YouTube. This connects these customers to the product through use, to the brand through having customers tag uploaded videos with the GoPro brand name, and other customers by sharing videos and encouraging customers to rate or like them.

Ask the class to comment on the quality of GoPro‘s marketing efforts. What would they suggest going forward?

Author Podcast A.1

Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. The main linkage between GoPro cameras and their users is: a. GoPro captures unfiltered user experience b. GoPro allows users to take unusual videos c. GoPro is an easy-to-use camera d. GoPro videos can be easily shared 2. GoPro also appeals to users interested in: a. watching food preparation b. making videos of family celebrations c. making wedding videos d. participating in or viewing action sports 3. GoPro has expanded its appeal by: a. creating a line of wearable enhancements b. developing cameras of various sizes to fit the needs of the user c. offering price incentives for add-on products d. creating software that makes sharing easy 4. To create an active brand community, GoPro has: a. invited customers to visit their website b. developed a number of online influencers c. solicited user reviews d. held Webinars on how to use their equipment Discussion Questions 1. What is the core message of the GoPro brand story?

2. What are some of the ways GoPro has used linkages to build the brand identity?

3. What might a ―surprise and delight‖ box from GoPro contain?

A.1 Concept Check Question 1: Describe the primary linkages between the main producer and customer elements of the marketing mix.

Answer 1: There are five core mix linkages between main producer and customer: Product » Customer Benefit (customers buy products for the benefits they receive from buying and using the product) Place » Convenience (decision about where/how to get a product is primarily out of convenience) Price » Cost (purchasers agree to pay with the understanding that they are receiving more

than are giving up) Promotion » Communication (interaction with company communicates a message whether intended or not) Participating » Connection (encouragement of customer participating through connection) Question 2: Using GoPro, give an example for each core linkage in the marketing mix for something GoPro decided.

Answer 2: Product » Customer Benefit: GoPro added new product features and new products over time to improve customer benefit (e.g., HERO6 Black offered improved stability and better Wi-Fi) Place » Convenience: GoPro decided to be available in a variety of retailers to be easy to buy Price » Cost: GoPro decided to lower the price on a less sophisticated version of a previous model three times Promotion » Communication: GoPro decided on the message ―Be a Hero‖ and encouraged customers to be proactive with their life in a positive way Participating » Connection: GoPro decided to encourage customers to upload their videos to YouTube and tag GoPro

Supporting Marketing Mix Linkages LO A.2 Conduct a marketing mix analysis that identifies potential supporting linkages between producer and customer elements of the marketing mix.

In addition to the core marketing mix linkages, it is possible to make decisions for one P that affect other Cs. For example, a marketer could use place not only to influence perceptions of convenience, but also to communicate with customers. Producer decisions that affect customer perceptions (Cs) other than the core linkage are referred to as supporting linkages, and some will be more useful than others for increasing value to the customer. Continue with the GoPro example to demonstrate possible supporting linkages.

How Can Product Support the Other Customer Elements of the Mix? Display Figure A.4. Product decisions typically affect customer benefit perceptions, but product decisions could affect any of the other four customer side elements as seen in Figure A.4. Discuss each of the elements in the model and ask the class for more examples for GoPro and other products.

Product–Convenience Ask the class how product decisions affect customer perceptions of convenience beyond the GoPro description in the textbook: GoPro accessories make it easier to operate the camera or camcorder hands free, etc.

Product–Customer Cost Ask the class how product decisions affect customer cost beyond the GoPro description in the textbook: the improved wireless radio that allows faster file transfer cuts customer time costs, etc.

Product–Communication Ask the class how product decisions affect communication beyond the GoPro description in the textbook: GoPro sends customers information via software that links the customers to the cloud to manage editing and video uploads, etc.

Product–Connections Ask the class how product decisions affect connection beyond the GoPro description in the textbook: GoPro is an interactive product that the customer uses in groups to record others participating in activities etc.

How Can Place Support the Other Customer Elements of the Mix? Display Figure A.5. Place decisions typically affect customer perceptions of convenience, but place decisions could affect any of the other four customer-side elements as seen in Figure A.5. Discuss each of the elements in the model and ask the class for more examples for GoPro and other products.

Place–Customer Benefits Ask the class how place decisions affect customer benefits beyond the GoPro description in the textbook: linking place decisions to customer benefits implies that the choice of stores and outlets can add benefit to the customer purchase and usage experience. GoPro selling through retail outlets that specialize in outdoor equipment offers customers the benefit of buying the GoPro and its equipment all at one time, and ideally offers the benefit of knowledgeable sales staff who could give advice on purchasing and using the equipment to maximize the experience, etc.

Place–Customer Cost Ask the class how place decisions affect customer cost beyond the GoPro description in the textbook: availability directly affects customers‘ time and effort costs. More availability lowers these costs, etc.

Place–Communication Ask the class how place decisions communicate with customers beyond the GoPro description in the textbook: place choices communicate potential quality to customers, etc.

Place–Connections Ask the class how place decisions encourage connections beyond the GoPro description in the textbook: you likely shop at certain stores because you like the products they carry and trust their advice, etc.

How Can Price Support the Other Customer Elements of the Mix? Display Figure A.6. Price decisions typically affect customer perceptions of cost, but price decisions could affect any of the other four customer-side elements as seen in Figure A.6. Discuss each of the elements in the model and ask the class for more examples for GoPro and other products.

Price–Customer Benefits Ask the class how price decisions affect customer benefit perceptions beyond the GoPro

description in the textbook: in some product categories, especially electronics and luxury products, price signals luxury or quality, etc.

Price–Convenience Ask the class how price decisions affect convenience for the customer beyond the GoPro description in the textbook: the most common linkage between price and customer convenience is through price bundling, offering a group of products for a single price, etc.

Price–Communication Ask the class how price decisions communicate with customers beyond the GoPro description in the textbook: price can communicate value, luxury, exclusiveness, quality levels, etc.

Price–Connections Ask the class how price decisions affect connections with and between customers beyond the GoPro description in the textbook: GoPro offers free apps and editing software that not only strengthens the connections between the product, brand, and company to customers, but also provides an opportunity for sharing videos more efficiently between customers, etc.

How Can Promotion Support the Other Customer Elements of the Mix? Display Figure A.8. Promotion decisions typically affect communication with customers, but promotion decisions could affect any of the other four customer-side elements as seen in Figure A.8. Discuss each of the elements in the model and ask the class for more examples for GoPro and other products.

Promotion–Customer Benefits Ask the class how promotion decisions affect customer benefit perceptions beyond the GoPro description in the textbook: GoPro occasionally offers discounted or free merchandise when purchasing a GoPro, though in many cases, retailers rather than GoPro offer such promotions, etc.

Promotion–Convenience Ask the class how promotion decisions affect convenience for the customer beyond the GoPro description in the textbook: GoPro promotes the convenience of uploading video to the cloud, etc.

Promotion–Customer Cost

Ask the class how promotion decisions affect customer cost beyond the GoPro description in the textbook: GoPro encourages customers to ask and answer questions about product usage directly on its website, which helps lower cost for other customers through increased knowledge of how to use the product, etc.

Promotion–Connections Ask the class how promotion decisions affect connections with and between customers beyond the GoPro description in the textbook: GoPro has collaborated with Red Bull and Ford to sponsor events where customers come together, etc.

How Can Participation Support the Other Customer Elements of the Mix? Display Figure A.9. Participation decisions typically affect customer connections, but participation decisions could affect any of the other four customer-side elements as seen in Figure A.9. Discuss each of the elements in the model and ask the class for more examples for GoPro and other products.

Participation–Customer Benefits Ask the class how promotion decisions affect customer benefit perceptions beyond the GoPro description in the textbook: most GoPro users enjoy taking and editing pictures and videos. They enjoy sharing their experiences with others, etc.

Participation–Convenience Ask the class how promotion decisions affect convenience for the customer beyond the GoPro description in the textbook: participation with other customers makes the entire process of capturing, editing, and sharing experiences more convenient for customers, etc.

Participation–Customer Cost Ask the class how promotion decisions affect customer cost beyond the GoPro description in the textbook: participation can reduce the time cost associated with buying or using the product since customers can share information that makes these tasks more efficient, etc.

Participation–Communication Ask the class how price decisions communicate with customers beyond the GoPro description in the textbook: GoPro invites shareholders and customers to participate virtually in management presentations and new product announcements through webinars, etc.

Author Podcast A.2

Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Andrew Loos says that GoPro has positioned itself as the camera that: a. records exciting events b. can go anywhere c. is versatile and easy to use d. records real life 2. Loos says that GoPro has successfully captured: a. the action sport market b. several niche vertical markets c. the market for self-recording d. the family vacation market 3. At present GoPro is one of the few recorders that can be viewed: a. on TV b. on a laptop c. on both iOS and android devices d. on earlier-version viewers 4. Jasmine Bina says that GoPro records moments of personal excellence; as such, it is: a. widely used by professional athletes b. used by people who have lofty goals c. an aspirational brand d. a brand with broad appeal Discussion Questions 1. How would you describe the GoPro brand? Who are its target customers?

2. Why do you think people watch such videos as those of someone eating a bowl of cereal? What is the attraction?

3. Would you consider GoPro to be an aspirational brand? Why or why not?

A.2 Concept Check Question 1: What is the difference between a core marketing mix linkage and a supporting linkage?

Answer 1: Producer decisions that affect customer perceptions in ways outside of the core linkages are supporting linkages (e.g., Product » Convenience, Product » Connection, Product » Cost, Product » Communication) Question 2: What are the supporting linkages for each P? Answer 2:

Product » Convenience, Product » Connection, Product » Cost, Product » Communication Place » Communication, Place » Customer Benefit, Place » Connection, Place » Cost Price » Communication, Price » Customer Benefit, Price » Connection, Price » Convenience Promotion » Cost, Promotion » Customer Benefit, Promotion » Connection, Promotion » Convenience Question 3: Use GoPro to provide an example for each P of a supporting linkage.

Answer 3: Students‘ examples will vary. Some examples follow.

Product » Convenience: features such as voice control and apps and software for easier editing Place » Customer Benefit: GoPro was for sale in retailers specializing in outdoor equipment, which meant consumer could purchase everything needed for an outdoor adventure in one place Price » Convenience: GoPro bundled cameras and accessories so a purchase was more convenient Promotion » Connection: GoPro collaborated with Red Bull and Ford to sponsor events where customers were able to make connections

Arriving at a Final Marketing Mix Solution LO A.3 Describe the steps to arriving at a final marketing mix solution.

The question is, ―What components should end up in the final plan?‖ In other words, from the full set of potential linkages, how do you arrive at a final marketing mix? We need to select the most important combination of marketing mix elements that effectively leverage our key decisions on the producer side with the things that matter most to our target customers.

Display and discuss contents of Figure A.10 ―Steps in Finalizing the Marketing Mix.‖ Arriving at a final marketing mix solution is a three-step process. First, decide which core linkages offer the best strategic fit for your target market. Second, decide which supporting linkages might enhance the core linkages, and rank the supporting linkages identified in order of importance. Finally, eliminate those elements that are either too difficult to implement or those that are inconsistent with the overall positioning plan for the brand and target market. What remains should be a comprehensive extended marketing mix. Use it as a framework for developing specific tools, tactics, budgets, and timelines that will fill out a formal marketing plan for accomplishing a specific set of objectives with a target market in mind (covered in Chapter 15).

Establishing the Core Marketing Mix Elements A marketer should identify the core elements in the extended marketing mix early in the planning process, though modification may be necessary as the plan develops. To decide on the core linkages, the manager must answer the following question: How will I use the producer-side P to deliver desired levels of the customer-side C that maximizes the perceived value of our exchange to our target customer? From our earlier discussion of the GoPro core marketing mix, you might summarize the following core marketing mix linkages below. Ask the class to develop each of these descriptions further and provide an interpretive understanding to help with preparations of the complete marketing plan.

Product–Customer Benefits GoPro should provide versatile, high-quality, technologically advanced cameras and camcorders that allow customers to capture and share their experiences with high-quality pictures and videos in creative ways. Perhaps the professional reproduction quality of high-speed activity should be emphasized.

Place–Convenience GoPro should be available in physical and online retailers focused on active, outdoororiented customers who want to capture and share experiential activities. Perhaps sales at

ski-hill shops would provide customers a convenient spontaneous opportunity to buy the product.

Price–Customer Cost GoPro should be less costly than having a professional capture experiences and offer good value for capturing and sharing experiences in high-quality images. Perhaps sales would be helped by a comparison to the time equivalent in dollars of hiring professional videographers to capture your ski holiday, and you get to keep the camera for the next ski holiday.

Promotion–Communication GoPro should communicate with customers using a variety of media but focus on digital media that integrates and interacts with its cameras and camcorders with a message of capturing and sharing experiences. Perhaps communications with customers should be focused online so as to take advantage of the ability to demonstrate what the camera can do.

Participation–Connections GoPro should encourage customer participation via media, events, and so on to encourage connections to the product, brand, company, and other customers, especially focused on taking, editing, and sharing active pictures and videos. Perhaps contests which encourage customers to share video clips recorded at ski resorts would create a larger network of social connects and thereby help publicize GoPro. Deciding Which Supporting Elements to Use After you identify the core elements to use, you must sort through the potential supporting mix linkages to determine which make the most sense to add to the core elements. It is important to keep in mind that the supporting mix elements are supposed to do exactly that, support the core elements. It helps to assess the options within each producer element, which is the structure we present here. Review and discuss the textbook suggestions that follow and ask the class for others. Here are the textbook suggested potential supporting mix linkages.

Product Product–Convenience GoPro should offer additional products and services that make it more convenient for customers to edit and upload video content.

Product–Customer Cost

GoPro should offer additional products and services that reduce the time and aggravation needed to edit and organize customer content. GoPro should automate some of the editing and uploading process and make the product simpler to use.

Product–Communication GoPro should use its software to announce updates and new products. GoPro should communicate brand image and usage options to customers through design features such as colour, size, and packaging that support a high-quality, rugged, technology image.

Product–Connection GoPro should facilitate connections by making the product interactive to make the experience easier to share. For example, two or more GoPros should ―talk to each other‖ to record action from multiple angles and synchronize the video.

Rank ordering the supporting linkages for product suggests a consistent focus on editing software and services, so perhaps this is the most significant opportunity for GoPro. The next most interesting option should be the potential for GoPro cameras to communicate with each other. Using design options to communicate portability and sophistication would be important, but less so than the previous two opportunities.

Place Place–Customer Benefits GoPro should use place by selecting to distribute through stores that offer additional benefits to customers, such as those that carry complementary products or those that have specialized service related to specific activities.

Place–Customer Costs GoPro should decrease customer costs by selecting to distribute through stores that decrease customers‘ time cost by selling complementary products. GoPro should also try to decrease customers‘ psychological costs by choosing specialty stores. GoPro should also try to decrease customers‘ time and search costs by choosing to sell through online specialty stores.

Place–Communication GoPro should use place to communicate by choosing to distribute through stores that share similar brand image, such as outdoor retailers with quality merchandise.

Place–Connections GoPro should use place decisions to focus on stores that are likely to establish stronger

relationships or connections with customers. To do so, GoPro would need to establish stronger connections of its own with those stores.

Of the potential supporting marketing mix linkages for place, which seem to be most significant? The most significant place decisions involve retail store choice. Your suggestion might be for GoPro to focus on specialty stores and technology retailers, but also stores that sell related products (outdoor equipment) that would be more likely to reinforce the brand image and establish stronger relationships with customers. Outfitters would also be good potential retail partners who could connect to customers.

Price Price–Customer Benefits GoPro should add free products and services to provide additional benefits for customers, especially benefits related to capturing, editing, and sharing high-quality video.

Price–Convenience GoPro should use price bundling to combine multiple transactions into a single purchase.

GoPro would also use bundling to make it more convenient for customers to buy related items, such as purchasing the camera with specific accessory bundles related to specific activities.

Price–Communication GoPro should use price to signal quality and value rather than discount.

Price–Connections GoPro should offer free or reduced-price accessories or services to strengthen connections to customers, which will be most effective for video editing and sharing.

GoPro could also offer group prices to encourage and strengthen connections among customers.

Of the potential price linkages, the most significant price linkage is probably the opportunity to offer free or reduced-price accessories and services. Doing so would potentially suggest added benefits to customers, reduce their purchase and use costs, and improve connections. GoPro should use price to signal value or quality over discounts, which could reduce quality perceptions. GoPro could communicate quality but still lower costs for customers by offering discounted or free accessories or services rather than discounting its main products.

Promotion Promotion–Customer Benefits

GoPro should offer promotions that give customers reduced-price or free merchandise with specific purchases, such as the GoPro subscription service, while maintaining quality price perceptions on its main products. GoPro should also offer customers special opportunities to reshoot videos using GoPro equipment and merchandise.

Promotion–Convenience GoPro should make it more convenient for customers to take advantage of special offers or promotions by pointing customers to these opportunities. GoPro should also provide ―how to‖ videos to show customers how to use the products more effectively and efficiently.

Promotion–Customer Costs GoPro should reduce customer cost by providing ―how-to‖ videos or webinars. GoPro should sponsor customer-led webinars or chats that would save customers time, money, and aggravation.

Promotion–Connections GoPro should use special events, either live or virtual, to connect with customers and to connect customers to each other.

Of the potential supporting marketing mix linkages for promotion, using webinars and live chats to communicate with customers seems to be relatively easy for GoPro. GoPro should use webinars, blogs, or live chats to add benefits, make purchase and use of the product more convenient, and strengthen connections with and among customers.

Participation Participation–Customer Benefits GoPro should encourage participation that is fun for customers such as video contests, group editing opportunities, and so on. GoPro should also encourage top users to share and connect with others to offer advice, make recommendations, and generally inform other customers to make the product experience more enjoyable and productive.

Participation–Convenience GoPro should encourage product reviews, tips, and advice to make buying and using the product and related software more convenient for customers.

Participation–Customer Costs GoPro should decrease customers‘ search and usage costs by encouraging customers to share their experiences with other customers via blogs, webinars, and other channels,

including both successes and failures.

Participation–Communication GoPro should encourage participation to communicate with customers via live presentations and special events.

Of the potential supporting marketing mix elements related to participation, probably the most significant opportunity is to provide ways for customers to have fun by participating in contests, challenges, and more. Encouraging customers to connect with each other to review products and provide advice would also be important. Using live presentations or special events to communicate with customers to strengthen connections to the company and brand is also a significant opportunity.

Eliminating Inconsistent Elements from the Mix The ranking exercise completed in stage two of the process for determining a final marketing mix identifies the elements that should receive the most consideration for inclusion in the final mix. However, in some cases, this process identifies potential linkages that do not necessarily fit with the positioning strategy for the target market or that cannot effectively be implemented due to cost or other considerations. The last stage in arriving at a final marketing mix is for you to check each of the supporting elements identified as potential contributors to the mix in the previous stage and consider the fit and implementation of each one to eliminate those that won‘t work for one reason or another.

The following section should be set up as a class exercise. Ask students to answer the questions in the following paragraph and to evaluate the suggestions that follow.

What else would they recommend for entry into the marketing plan?

Considering the supporting marketing mix linkages identified in the previous section, are there any you think that might not fit GoPro‘s positioning strategy? It helps to think about which linkages don‘t quite fit with the others or seem different in some respect. For each of these options, the decision to eliminate or keep the supporting marketing mix linkage should be based on a discussion of the positives and negatives of using the specific linkage. Using this approach, you might consider eliminating the following linkages: Product Increasing interaction with the product should be considered a potentially advantageous linkage that should strengthen the connection between the customer and the product. However, many customers in the target market would prefer simpler interaction with the product. Indeed, GoPro found this to be true and made it a point to note in its 2016 annual report that one of the main objectives for the products from GoPro going forward was to make the products simpler to use. Note that this does not mean the products shouldn‘t have any capability for customization. It simply means that GoPro needed to focus its attention on simple interactions with the product and put more

complex tasks in the background to be handled automatically.

Place Place decisions require tradeoffs. On one hand, GoPro wants to maximize the types and variety of stores to make it as easy as possible for customers to purchase a GoPro. However, it is clear that there are significant advantages to having GoPro products available only in stores that offer some minimum level of support and have a minimum level of knowledge about the activities GoPro might be appropriate for capturing. In other words, GoPro would probably be best served by balancing availability with focus. This decision is made easier by online retailing since a wider group of customers can access online retailers, but GoPro does not have to sell through stores that such as large discounters that don‘t match its image.

Price Price decisions also require tradeoffs. On one hand, GoPro wants to present a highend, high-tech product image. Technology products benefit from a higher price if the product is associated with advanced technology and has a desired newness or novelty factor. In this case, you might argue that GoPro should have a relatively high price.

However, GoPro also wants to make sure the product appeals to a wide group of customers. GoPro does not want to limit its appeal to extreme specialists but wants it to be a product for the customer who wants to capture participation in a 10k race or the family scuba-diving vacation. This suggests a relatively lower price. The solution is to price discriminate by offering different levels of the product to different customers based on what they want from the product. GoPro needs a range of prices rather than a very high or very low price for its products.

Promotion From the promotion mix elements discussed, our analysis did not result in any obvious problems or tradeoffs. We don‘t need to eliminate any of the promotion items identified.

Participation Similar to the case with the promotion elements, the participation elements suggested were similar in nature and did not seem to suggest any potentially negative consequences. Hence, we do not need to eliminate any of these elements either.

Author Podcast A.3 Please note: Podcast Questions do not appear in the eBook and are designed to give instructors a few options for quick quizzing and starting points for discussing the podcasts with their students. Correct answers to multiple choice questions are bolded.

Multiple choice Questions 1. Jasmine Bina says that GoPro owns the mind share on the real-life video. By that she means: a. brand recognition b. market share

c. advertising advantage d. perceived value 2. To create brand identity, GoPro has emphasized: a. product mix b. action and adventure c. authenticity d. ease of use 3. Bina says that GoPro has the mind share, but is losing ground in: a. product quality b. market share c. competitive pricing d. innovative advertising 4. Andrew Loos says that they can focus on: a. newer and better software for sharing b. lowering prices c. finding new niche markets d. improving profitability Discussion Questions 1. Jasmine Bina mentions Kleenex as a brand that has become closely identified with tissues. Can you think of another product that is known by a brand name rather than a product type? Why do you think this happens?

2. Why is GoPro losing market share?

3. Is focusing on niche markets an effective long-term strategy for growth? Why or why not?

Mini Case 14 Question 1. What recent ads have you viewed online (on YouTube, Facebook, etc.)?

Were these effective? Did you respond to them, and if so, how?

Answer 1. Students‘ answers will vary.

Question 2. Have you shared any brand-related videos, or has someone in your social network shared brand-related videos with you? Why or why not?

Answer 2. Students‘ answers will vary.

Question 3. Do you think it makes more sense for a brand to hire a company like WaterWerks for their video ad campaigns, or should they try to hire someone to work for the company with video ad skills?

Answer 3. Students can argue their choice either way. It is expensive and requires collaboration to work with an agency to create ads for a company. However, it requires more than just video ad skills, which is often why it is outsourced.

Question 4. What is the best way for a company like WaterWerks to measure video ad effectiveness?

Answer 4. WaterWerks should use a combination of metrics including impressions and frequency. However, it is also important to measure conversion to see if the ad resulted in the action the company was looking for.

Question 5. Do you see a potential issue for companies like WaterWerks regarding privacy?

Answer 5. Privacy is always an issue for some customers. The brands face an additional privacy issue because they are using a third-party to assist with advertising. However, this is not unlike Facebook or Google providing a company with its analytics.

A.3 Concept Check Question 1: What are the three steps to arriving at a final marketing mix solution?

Answer 1: 1. Decide which core linkages offer the best strategic fit for your target market.

2. Decide which supporting linkages offer the best strategic fit for your target market.

3. Eliminate elements.

Question 2: Why do some potential marketing mix linkages get eliminated from the overall plan?

Answer 2: Some linkages may get removed from the overall plan due to either being too difficult to implement, or for the simple fact that they may not be consistent with the overall positioning plan for the brand and its target market.

Application Questions Question 1: What is the difference between a core marketing mix linkage and a supporting marketing mix linkage? Provide an example of each.

Answer 1: A core marketing linkage represents the primary way that decisions made by the producer affect the customer perception, whereas supporting linkages are the other ways that a particular producer decision affects other customer perceptions. An example of a core linkage is Product Customer Benefit, whereas a supporting linkage for Product would be Communication, Convenience, Connection, or Cost.

Question 2: GoPro‘s camera/camcorder product and editing software make it a natural fit for managing participation to leverage customer connections, especially among each other. What other products can you think of that are similar in this regard?

Answer 2: Responses will vary. Examples may include Harley Davidson, as noted in Chapter 12, which puts on events for customers; the band Phish (many bands, in fact), that has events, shows, online message board communities, etc.; and the small beauty brand Glossier, which encourages customer communities.

Question 3: Why is it important to consider all of the potential supporting marketing mix linkages rather than simply focusing on the most obvious opportunities?

Answer 3: Depending on the product, there is significant opportunity beyond the core linkages that can affect customer perception. It may be that once a linkage is thought through, opportunities beyond what seemed to be obvious in the beginning for product decisions to have a big impact emerge.

Question 4: Provide an example of the supporting marketing mix linkage between product and convenience for a product you buy other than a GoPro. Answer 4: Answers will vary. Examples include: -

Microsoft Office, which is often bundled with personal computers and laptops Amika haircare, which offers a product bundle of its hot iron brush, along with shampoo, conditioner, and styling products to protect hair from heat

Question 5: GoPro has added the capability for recorded material to automatically sync between the cloud and the camcorder. Which core marketing mix linkage does this represent? Which supporting linkages could this affect? Explain your answer.

Answer 5: Core linkage: Product » Customer benefit (aspects/features of the product benefit the customer by making it easy to back up or sync video content to the cloud);

Supporting linkage: Product » Convenience (aspects of the product automatically syncing are convenient for the customer) Question 6: Explain the supporting marketing mix linkage between price and communication. Provide an example.

Answer 6: Price communicates a financial contract that the seller is willing to accept from the customer. In this way, price can communicate value or luxury, exclusiveness, and varying degrees of quality. Examples include: Rolling Stones concert tickets have high cost which communicates exclusiveness; Yeezy Boost 350 sneakers have a high cost which communicates exclusivity; WhoWhatWear clothing sold at Target has a low price point which communicates value.

Question 7: What is the main reason you might eliminate a supporting marketing mix linkage from the final marketing mix plan?

Answer 7: The main reason linkages may get removed from the overall plan is either because they are too difficult to implement, or for the simple fact that they may not be consistent with the overall positioning plan for the brand and its target market.

Discussion Questions Question 1: Which of the producer-side elements of the core marketing mix do you think is the most important to GoPro‘s marketing success? Justify your answer.

Answer 1: Answers may vary based on justification; however, it is most likely that the response will be the Product » Customer Benefit linkage. GoPro is successful because it is a unique product that filled a niche in the market that previously was not filled. Its features—and the product itself—make filming in a variety of difficult situations easier for amateurs. The new features and new products that have emerged from the product line all seek to provide customers with innovation.

Question 2: Which of the customer-side elements of the core marketing mix do you think is the most difficult for GoPro to manage? What makes this customer element so difficult for GoPro to manage?

Answer 2: Answers will vary based on justification; however, a sample response is that the Price » Cost linkage has been one of the trickier core linkages for GoPro to manage, specifically in regards to the HERO4 launch and its Karma drone launch. The HERO4 was launched at $399.99, which had poor sales. GoPro knocked down the price again, and response was still poor. Once more it was reduced to $199. This indicates that GoPro incorrectly assessed customers‘ value perceptions for that product.

Question 3: How has GoPro leveraged participation to gain a marketing advantage?

Answer 4: GoPro has encouraged customers to upload their videos to YouTube and tag them with GoPro‘s info. This initiative elicited over 6,000 videos uploaded each day and got GoPro‘s YouTube channel more than 5 million subscribers. Cultivating this level of connection has benefited GoPro significantly.

Question 4: GoPro has to make a trade-off with respect to place. Should GoPro try to distribute through as many retailers as possible or limit its retailers to a specific retailer type? Explain your answer.

Answer 4: Responses will vary. Some might argue that GoPro should sell through as many retailers as possible in order to facilitate a strong Place » Convenience linkage.

Others might cite the issue that GoPro had with this model in 2016 with the HERO5 wherein they had so many retail outlets where the product was to be made available, that they could not provide enough of the product to each retailer, which resulted in retailers limiting or eliminating promotions and limiting sales.

Question 5: Can you think of a product-customer benefit failure? Did it represent a different linkage, and if so, which one?

Answer 5: The initial launch of the Karma drone package could be viewed as a product– customer benefit failure in that it had power problems and had to be recalled. Its relaunch, however, could be viewed as a price–cost failure, as GoPro itself cited cost issue as the reason it was discontinued.